hera group, consolidated quaterly report as at 30 september 2013
DESCRIPTION
In the first 9 months of 2013, Hera performance highlights a growth in all the main economic figures, despite macro-economic scenario is still influenced by the international economic crisis. These results are based on water business and on organic growth factors in liberalized (energy and waste) and regulated activities.TRANSCRIPT
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
1
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Consolidated quarterly report as at 30 September 2013
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
2
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Table of contenents
Mission 03
Governance bodies and officers 04
Key financial data 05
Introduction 06
Strategic approach and business plan 08
Business sector 10
Share performance on the Stock Exchange and shareholder relations 13
1 Directors’ report
1.01 Group performance for the nine months ended 30 September 2013 17
1.01.01 Operating and financial results 18
1.02 Investing activities 22
1.03 Analysis by business segment 28
1.03.01 Gas segment 30
1.03.02 Electricity segment 32
1.03.03 Integrated water cycle segment 34
1.03.04 Water management segment 36
1.03.05 Other services segment 38
1.04 Analysis of net borrowings 40
1.05 Human resources 41
1.06 Subsequent events 42
2 Consolidated Financial Statements
2.01 Consolidated financial statements 45
2.01.01 Consolidated income statement 45
2.01.02 Consolidated comprehensive income statement 46
2.01.03 Earnings per share 47
2.01.04 Consolidated statement of financial position 48
2.01.05 Consolidated cash flow statement 50
2.01.06 Statement of changes in consolidated equity 51
2.02 Explanatory notes 52
2.03 Consolidated net borrowings 59
2.04 Equity investments 60
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
3
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Mission
"Hera’s goal is to be the best multi-utility in Italy for its customers, workforce and shareholders. It
aims to achieve this through further development of an original corporate model capable of
innovation and of forging strong links with the areas in which it operates by respecting the local
environment”.
“For Hera to be the best means to represent a reason for pride and trust for: customers, who receive,
thanks to Hera’s constant responsiveness to their needs, quality services that satisfy their expectations. The
women and men who work at Hera, whose skills, engagement and passion are the foundation of the
company’s success; shareholders, confident that the economic value of the company will continue to be
generated in full respect of the principles of social responsibility; the reference areas, because economic,
social and environmental health represent the promise of a sustainable future; and suppliers, key elements
in the value chain and partners for growth".
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
4
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Governance bodies and officier
Chairman Tomaso Tommasi di Vignano
Vice-Chairman Giorgio Razzoli
CEO Maurizio Chiarini
Director Mara Bernardini
Director Filippo Brandolini
Director Marco Cammelli
Director Luigi Castagna
Director Pier Giuseppe Dolcini
Director Valeriano Fantini*
Director Enrico Giovannetti
Director Fabio Giuliani
Director Luca Mandrioli
Director Daniele Montroni**
Director Stefano Manara****
Director Mauro Roda
Director Roberto Sacchetti
Director Rossella Saoncella
Director Bruno Tani
Director Giancarlo Tonelli
Director Giovanni Perissinotto
Director Cesare Pillon
Chairman Sergio Santi
Standing Auditor Antonio Venturini
Standing Auditor Elis Dall'Olio
Chairman Giorgio Razzoli
Member Fabio Giuliani
Member Luca Mandrioli
Member Rossella Saoncella
Chairman Giorgio Razzoli
Member Marco Cammelli
Member Daniele Montroni**
Member Stefano Manara****
Member Bruno Tani
Chairman Tomaso Tommasi di Vignano
Vice-Chairman Giorgio Razzoli
Member Maurizio Chiarini
Member Giovanni Perissinotto***
Chairman Giorgio Razzoli
Member Filippo Bocchi
Member Mario Viviani
PricewaterhouseCoopers
* Died 18 March 2013
** Resigned 14 March 2013
*** In office since 24 January2013
**** In office since 28 August 2013
Indipendent auditing firm
Board of Directors
Board of Statutory Auditors
Internal and Risk Control Commitee
Remuneration Commitee
Executive Commitee
Ethics Commitee
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
5
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Key financial data
*adjusted by 74,8 million Euro, due to Acegas Aps consolidation
1,23 1,61
1,96 2,56
3,06 2,58
2,90 3,32 3,37
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13
Revenues (b€)
CAGR +13,4%
213290 299 350 390 431 467 468
597
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13
Ebitda (m€)
CAGR +13.7%
124156 154
180 193 218 241 237295
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13
Ebit (m€)
CAGR +11.5%
91118
99 97 92
135156
141
182
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13*
Pretax profit adjusted (m€)
CAGR +9,1%
91118
99 97 92
135156
141
182
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13*
Pretax profit adjusted (m€)
CAGR +9,1%
91118
99 97 92
135156
141
182
9M '05 9M '06 9M '07 9M '08 9M '09 9M '10 9M '11 9M '12 9M '13*
Pretax profit adjusted (m€)
CAGR +9,1%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Introduction
The financial statements for the first nine months of 2013 once again confirm growing economic-financial
results, with a further improvement with respect to the increase in operational revenue seen in the first two
quarters. These results corroborate the strategic multi-utility structure with a long-term multi-stakeholder
perspective pursued by the Group. Since its establishment, Hera has in fact consistently proved to be
capable of achieving growth even in crisis scenarios such as the current one.
The macro context continues to show unfavourable conditions, even though the strongly negative trend
seems to have passed and the political situation appears to be entering a phase of greater stability. The
broader sovereign debt crisis, which led Italy’s credibility to reach a historical low during the course of 2012
(the Italian spread with respect to the German Bund was briefly over 520 basis points), showed continual
improvement in 2013, as is recorded by the slow but accentuated decrease of the spread, which has
withdrawn to around 250 basis points. Nevertheless, the macro-economic data still reflect a difficult current
scenario, although an improvement has been forecast for the end of the calendar year. The foreseen Gross
Domestic Product (GDP) shows a -1.8% fall, compared to -2.4% in 2012. Italian industrial production showed
a negative trend of -4.0%, with respect to -6.7% in 2012. This context also contributed to the decline in
energy consumption, down -8.9% (compared to -3.9% in 2012) for gas and a deceleration in the demand for
electricity (-3.8% compared to -2.8% in 2012), led by the significant contraction that came about in the
thermoelectric sector (-24%).
Within this difficult context, the results achieved by the Group are even more appreciable: the figures
pertaining to the first nine months of 2013 reflect the positive contribution coming from all organic growth
factors, as well as the contribution of the aggregation with Acegas Aps, which became part of the Hera
Group at the beginning of the year.
Liberalised market strategies continued to sustain customer growth in the electricity sector, confirming the
efficiency of the Group's sales force in an increasingly competitive market and controlling the effect of
reduced consumption, which is still influenced by the country’s negative macro-economic situation. The
impact of the crisis was in fact particularly visible during the period in question, with volumes decreasing by
over 7% across Hera’s area of reference. This drop was partially compensated by the consolidation of the
Acegas Aps data. Notwithstanding this, the Group achieved better results with respect to the preceding year,
thanks to more selective marketing policies that also allowed wider margins to be obtained, as well as growth
in economic results.
On the gas market, the Group reported sales volumes substantially in line with the corresponding period of
the previous financial year, while trading activities suffered from the regulatory amendment introduced on the
protected market on 1 April 2013, which brought about a significant reduction in sales volumes and induced
a slight contraction of the results in the business area.
The waste collection business witnessed a further recovery of volume, that had already been seen in the
initial part of the financial year. This data reflects household consumption levels that are still influenced by
Italy’s negative economic situation, which was however more than compensated for by market expansion
created by efficient marketing policies. This allowed for a positive increase in volumes handled of over 6%,
which was influenced both by the integrations carried out by the company. Activities managed by concession
in energy distribution, urban waste collection and integrated water services, that represent roughly 58% of
the Group’s EBITDA, account for approximately 70% of the growth seen in the results of the first nine
months of 2013, including the investments made and the tariff adjustments recognised by the Authorities.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
The financial statements for the period show a major increase in net profits, which is partially due to the
contribution deriving from the positive differential between the consolidated net asset value of Acegas Aps
and the value paid for the aggregation with the Hera Group. The results, in any event, show positive growth
even with respect to the 2012 adjusted figures and without the positive contribution of the non-recurring
effects of the aggregation with Acegas Aps. The final results from Acegas Aps in the period show clear
progress with respect to the first nine months of the preceding year, prevalently as an effect of the positive
synergies created by the aggregation and of the industrial growth anticipated by the Group’s business plans.
From a financial point of view, net debt levels consistent with the those of the first semester 2013 (increase
of 1%), or roughly €2.78 billion, were recorded; this is principally due to the integration of Acegas Aps’ debt.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Strategic approach and business plan
Hera’s main strategic objective has always consisted in the creation of value from a multi-stakeholder
perspective in the medium-and long-term, by competing autonomously and efficaciously in liberalised
markets. The objective is to replicate a “unique” business model intended to expand the Group and manage
primary services in an increasingly efficient manner in order to satisfy the main stakeholders. Since
2002, this strategy has continued to sustain uninterrupted growth in results through all of the main levers
available. The strategy is based on the Group’s strong points, which consist in an “open” organisational
model that is able to provide for an efficient increase in size through external lines, national leadership in the
waste sector, and an extensive, loyal customer base concentrated in the reference area.
The Group’s strategic imperative is to preserve its customer base, giving a great deal of attention to service
quality, after-sales support service and an integrated offer of a complete set of primary services.
Furthermore, development strategies aimed at maintaining a balance between the various activities have
been set into place, in order to conserve a low variability/risk profile as regards the Group's results.
Hera’s strategic plan has been articulated into five key priorities, which have guided the Group’s
management along a continuous and linear path for over a decade:
1) Pursuing a process of extracting synergies through corporate aggregations, in a complete
integration of the companies incorporated within Hera;
2) Implementing the plan for large plant construction and developing networks, balancing the growth
of all businesses involved and increasing the efficiency and the quality of the services;
3) Preserving a solid, low-risk economic-financial profile, capable of satisfying stakeholders
through a sustainable approach in the medium to long-term;
4) Pursuing merger and acquisition opportunities in liberalised sectors (waste processing, energy
sales and generation), both to consolidate its leadership in the environmental sector and to expand,
in a defensive perspective, its offer to customers with electricity services;
5) Applying Hera’s innovative aggregation model for multi-utility businesses in neighbouring
areas, according to a rationale of territorial continuity, focusing on compatible activities and
economic-financial profiles capable of maintaining the Group’s financial solidity.
To ensure greater efficiency in the exploitation of scale economies, mergers were integrated in the original
model based on an industrial holding company. At the same time, “direct operational supervision” of all local
territories was ensured, to preserve the crucial competitive advantages deriving from customer proximity and
local roots. A business reorganisation was implemented as of 1st January 2013, through a corporate
structure consisting of vertical units capable of further improving the management of the businesses with
respect to the preceding organisation, that turned to a territorial model. This new organisational model based
on vertical units was conceived in order to establish organisational structures dedicated to territorial relations
and to reinforce the solid ties that have always represented one of the Group's main competitive advantages.
The strategy of focusing on core activities has led to a rationalisation of the portfolio, with the consequent
disposal of minor businesses and the sale of assets held to be non-strategic, as well as a corporate
rationalisation involving a much lighter organisation, which currently responds better to the Group’s
management rationale.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
The Group’s development strategies in energy businesses have always aimed at consolidating its
significant position in core sectors (gas distribution and sales) across its reference area, both by improving
distribution networks and service quality and by boosting after-sales service support. The dual-fuel strategy
was designed so as to complete the offer of electricity services mainly to existing customers, and was
supported by a prudent upstream strategy of self-generation development, complementary to the market
procurement sources. All of this has made it possible to maintain low risk-exposure profile in a sector in
which the Group has now become one of Italy’s first five operators.
In the waste disposal market, of which Hera is the leader in Italy, strategies have been aimed at
strengthening plant structures so as to guarantee sustainable operations and respect for the environment. In
a sector featuring seriously underdeveloped infrastructures, the Group’s goal was to develop a fully
integrated plant system, capable of reusing discarded materials and extracting energy from waste, through
an ambitious investment policy involving efficiency improvement and rationalisation of operational activities.
In its regulated businesses, Hera has adopted a strategy for ensuring greater efficiency and development
of its plants, by creating infrastructures in all reference areas and improving its levels of efficiency with a view
to gaining contracts when the present concessions expire and are put to tender.
These underlying strategies represent the backbone of the 2013-2017 business plan, approved by the
Company’s Board of Directors at the end of September. The Group fully expects to continue in its positive
growth (roughly +7.5% average annual growth of the MOL and roughly +5% average annual growth of
earnings per share) through levers of external growth mainly consisting in the integration of Acegas Aps and
Energonut, who have fully contributed to these results since the beginning of the current financial year.
Organic growth constitutes another important source of prospective growth, and is based on a reconfirmation
of contracts for gas distribution that will be put to tender in the next few years (and that will bring about a
slight increase in results, following the increased area conceded by the Authority), a research of synergies
from increased economies of scale, and a continued expansion of the markets of electric energy retail and
waste disposal. Growth through internal lines should be more than sufficient to compensate for the effects of
the revisions imposed by the Authority on regulated activities.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Business sectors
Hera is the leading domestic operator in the environment sector by quantity of waste collected and treated.
Waste collection, regulated by concession contracts, has expanded over the years through a series of
subsequent corporate mergers, and now covers all of the areas from Trieste to Pesaro-Urbino. Thanks to
both a constant rise in customer awareness and the support of local institutions, Hera’s waste collection
system is now based on recycling the majority (over 50%) of waste materials (glass, paper, plastic, metals
and biomasses) and on the valorisation of the energy content of the remaining part, using waste-to-energy
production and biogas extraction.
This efficient system has made a considerable contribution to decreasing the amount of urban waste
disposed of directly in landfills, thereby reducing soil pollution.
Waste treatment and disposal activities have benefited over time from a significant expansion and renovation
of the asset base. A multi-year plan for modernising 7 WTE plants was completed in 2011. In 2013, the plant
base is being enriched with 3 additional WTEs: one in Trieste, one in Padua (with the aggregation of Acegas
Aps) and one WTE in Molise (Energonut, acquired from Veolia during the course of the previous financial
year). Hera’s asset base has also been enriched and completed by other types of plants for biomass
treatment and selection of material coming from separate waste collection. Today’s asset of over 80 plants
(excluding the contribution of Acegas Aps), which is able to satisfy requests for treatment and optimisation of
any kind of waste, represents one of the Group’s points of excellence on a national scale, and has supported
the considerable expansion in volume of activity over the decade, satisfying complex needs concerning
disposal and decontamination of production sites.
With its generation of almost 1 TWh per year, the Group has became one of the leading operators committed
to the recovery of electricity from waste.
In order to best rationalise its activities, in 2010 Hera established Herambiente, to which all liberalised waste
disposal, treatment and recovery operations were transferred. In the same year, the Group opened the
shareholding structure of Herambiente to the Eiser infrastructure investment fund, thus ensuring financial
support for future development. The integration with Acegas Aps and the acquisition of Energonut further
reinforced the Group’s leadership in the sector with an expansion of its range of action, given that the bases
situated in the North-East and in the central part of the country give Hera greater competitive strength in
those markets, as is shown by the increase in volume that appears in the interim financial statements
published in 2013.
Since its establishment, Hera has operated in integrated water service management, from network
distribution of drinking water to collection and purification of waste water, and has the exclusive right to these
services in seven provinces in Emilia-Romagna and in the northern Marche, on the basis of long-term
concessions (on average until 2023).
Following the mergers that have taken place since its establishment, the physiological development of its
activities and the considerable investments made, the Group, excluding the contribution of Acegas Aps, has
practically doubled the number of its customers, strengthened its purification plants, expanded its distribution
and drainage system networks by roughly 10 thousand linear km, and increased its business volume. The
water network, like all Group networks, is currently controlled by a single remote control system created in
2007 and held to be one of the most advanced in Europe. Remote monitoring of networks has made it
possible to optimise maintenance and supervision processes, ensuring greater efficiency and lower running
costs. Thanks to these systems and to the modernisation of the networks, the Group’s recorded performance
(in terms of average leaks per kilometre of network) has been counted among the nation’s most efficient.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
The entire system of environmental control, from the analysis of water before distribution to the collection
and purification systems for waste water, has shown major progress and guaranteed high service quality and
maximum customer safety.
The Group is the second largest operator in Italy by volume of sales, with a continuous and extensive
presence in the reference market. Following the aggregation with Acegas Aps, Hera reached 1.44 million
users in the sector.
At the end of the financial year, the Authority for regulation of Electricity and Gas, AEEG, responsible for
defining the new regulation system of the CCI, defined a transitory tariff system for 2012-2013 (later
protracted for all of 2014) that put an end to the regulatory uncertainty of the last 18 months. The
fundamental principles of the tariff system allow the plant modernisation and activity development plan to
continue with greater ease.
The Group covers the reference territory almost completely in the gas sector as well. This includes services
in distribution and in methane gas sales and trading, as well as district heating management. Hera is
currently among the leading “local” firms, and one of the first nationally in terms of volume distributed. In
spite of the liberalisation of the sales market, the Group has developed its original customer base, reaching
1.12 million users, in other words almost doubling it in ten years, thanks to a series of corporate mergers.
The contribution of Acegas Aps permits the customer base to be widened to a significant degree.
The distribution network, developed through direct investment and the acquisition of companies, has
reached 14 thousand km. Acegas Aps also brings an important contribution of asset bases that allow the
Group to look optimistically towards future tenders for gas distribution concessions in all reference areas.
The unstable situation of energy markets has led the Group to follow prudent and flexible procurement
policies, seizing the opportunities that derive from the slow process of initiating and developing both the
possibility of importing raw materials and the Italian and international wholesale market. Hera has a multi-
year capacity of gas importation that reaches almost 500 million cubic metres per annum, through the TAG
gas pipeline (Russian gas). It has also gradually diversified internal (domestic) sources, striving for maximum
flexibility through annual agreements. Lastly, an organisational redistribution has been implemented that has
led to the establishment of a sales company (Heracomm) and a trading company (Heratrading), thanks to
which Hera has launched its own direct operations on a number of European hubs. This asset of Hera’s
supply portfolio has protected it from the risks derived from “pre-determinate” material purchase
commitments many years in advance.
The volume of sales relating to district heating has also almost doubled in the last 10 years; as is well known,
this is a way of transforming energy into heat more efficiently and with less impact on the environment than
is the case with independent home heating systems.
The district heating network has been developed in various urban areas across the territory, including those
near the large waste-to-energy and cogeneration plants built in the last ten years, thereby exploiting heat
sources that would otherwise not be used.
The “dual fuel" commercial strategy has allowed the electricity market to be developed at a sustained rate
of growth, both by way of cross-selling to existing customers and through expansion into new markets. This
strategy has proven able to defend existing customers in the gas sector, as previously shown (and to
achieve notable domestic market shares), with annual sales of roughly 10 TWh, on a base - that has
increased tenfold - of over 560 thousand customers, above and beyond those provided by Acegas Aps.
Commercial development in the electricity sector has been accompanied by a parallel and cautious
development in electricity generation, for a sustainable management of customer demand.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
12
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
A 80 MW gas cogeneration plant was completed in the Imola area in 2008, which ensures self-sufficiency for
the province in the event of a national network blackout. Lastly, Hera’s generation equipment saw the
development of over 110MW of clean energy from incineration plants, to which the energy produced in
Acegas Aps’ two plants must be added, a further 13 MW from biomass waste-to-energy plants, as well as
the capacity derived from recent development of small biogas and photovoltaic generation plants, which
complete the diversified portfolio of the Group’s renewable and assimilated sources.
Hera continues to be an operator with a relatively limited presence in generation activities; the greater part of
the demand for electricity from end customers is in fact prevalently covered by an amply diversified portfolio
of bilateral supply contracts and activities in market trading.
Electricity distribution had seen major development ever since Hera’s establishment; the merger with the
Modena multi-utility Meta Spa in 2005, and the acquisition of Enel’s electrical network in the province of
Modena, contributed to the expansion of the grid until it reached a dimension of almost 10 thousand
kilometres that, thanks to the investments made, is completely equipped with electronic meters and
managed remotely by a single technologically advanced remote control centre. The contribution resulting
from the Acegas Aps aggregation is important in this sector as well, in particular for the commercial
development potentiality that these markets can offer to the integrated status of the dimensions of the new
Group.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
13
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Share performance on the Stock Exchange and shareholder relations
During the first nine months of 2013 the stock continued along the upward trend that began in 2012, with a
performance of +34.6% (passing from €1.10 at the end of 2011 to €1.48 at 30 September 2013), exceeding
both the equity market (+16.6%) and the Italian local-utilities index (+22.9%). In particular, Hera’s stock trend
showed greater stability than the Italian local-utilities index, which went through a period of highly volatility.
Hera in fact succeeded initially in defending itself from the downward trend that the market encountered in
the first half of 2012, and later in replicating the excellent performance of the entire sector.
Despite the persistence of both political and financial macro-economic difficulties, the Hera stock, supported
by both a revaluation of the local utilities sector and by the good interim results published during the financial
year, maintained a positive performance in the first part of the year. This superior performance also
coincided with the good outcome of the OPAS on Acegas Aps, which allowed the company to be delisted.
Today, public shareholders are represented by 189 reference area Municipalities holding 61.0% of Hera’s
ordinary share capital, made up of 1,342,876,078 ordinary shares. The number of shares increased during
the first semester of 2013 by 227,862,324 shares, among which 143,380,765 assigned to the Municipalities
of Trieste and Padua, against the merger with Acegas Aps Holding S.r.l., with effect from 1 January 2013.
The remainder (84,481,673 shares) was assigned to Acegas Aps private shareholders who endorsed the
OPAS. Following these non-recurring transactions, the Hera Group gained complete control of Acegas Aps
ordinary shares.
‐40%
‐30%
‐20%
‐10%
0%
10%
20%
30%
40%
50%
60%
30/12/2011
27/01/2012
24/02/2012
23/03/2012
24/04/2012
23/05/2012
20/06/2012
18/07/2012
16/08/2012
13/09/2012
11/10/2012
08/11/2012
06/12/2012
10/01/2013
07/02/2013
07/03/2013
08/04/2013
07/05/2013
04/06/2013
02/07/2013
30/07/2013
28/08/2013
25/09/2013
Hera FTSE All shares Local Utilities
Performance of Hera share as at 30th September 2013
+34.6% +16.6% 22.9%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Since 2006, Hera has conducted a buyback programme of treasury shares with a maximum of 15 million
shares, for a total amount of €60 million. This programme is aimed at financing opportunities to buy small
companies and at rectifying any unusual movements in the Group’s share price with respect to its major
domestic competitors.
The Shareholders' Meeting held on 30 April 2013 renewed the treasury share purchase plan for 18 further
months, for a maximum overall amount of €40 million and a total of 25 million shares. As at 30 September
2013 Hera held approximately 11.7 million treasury shares in its portfolio.
Over the course of the last ten years, shareholders remuneration has always shown constant or increasing
dividends, even during the most delicate moments related to the recent macro-economic crisis. In 2013 as
well, a dividend of 9 euro cents per share has been paid, in line with the preceding financial year.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dividends approved (ml€) 27.6 42.0 48.2 71.2 81.3 82.5 82.5 88.9 99.9 100.4 100.4
DPS (€) 0.035 0.053 0.057 0.070 0.080 0.080 0.080 0.080 0.090 0.090 0.090
From the moment in which it was listed, the Group has promoted and increased relations with financial
analysts to ensure that investors have a wide range of independent opinions. Over time, this coverage
increased reaching 15 studies, with international brokers such as Citigroup and Merrill Lynch. The financial
crisis of recent years has caused many banking institutions to be profoundly restructured, bringing the
number of the Hera stock studies to 7 (in the last 2 years the studies of Banca Aletti, Banca IMI,
Centrobanca, Deutsche Bank, Exane, Merrill Lynch, Mediobanca, Sogen and Unicredit have been
interrupted); despite this, Hera still enjoys a “coverage” that is among the broadest in the local-utilities sector:
Alpha Value, Banca Akros, Citi, Equita, ICBPI, Intermonte and KeplerCheuvreux. At the end of the semester,
Hera can boast an largely positive set of evaluations, with one third of the analysts conferring a
“Buy”/”Outperform” rating, two thirds a “Hold/Neutral” rating, and no negative opinions. As at 30 September
2013, the 12-18 month average stock target price expressed by analyst evaluations is around €1.61 per
share.
Free float31.2%
Private shareholders agreement 8.0%
Municipalities of Ferrara Province 2.6%
Municipalities of Bologna Province 15.4%
Municipalities of Modena Province 10.5%
Municipalities of Romagna Provinces21.7%
Municipalities of Trieste Province 5.3%
Municipalities of Padua Province 5.3%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Hera stocks are included in many “SRI” indices, and have been part of the “Kempen SNS Smaller Europe
SRI Index” for years. In 2008, they were also included in the “ECPI Euro Ethical Index”. In 2009, they were
included in the “ECPI EMU Ethical Index”, consisting of 150 companies with sustainability characteristics
consistent with the “ECPI SRI” methodology and listed on the European Union economic/monetary market.
The Group’s main means of communication with its shareholders and stakeholders is its website
www.gruppohera.it. During the last ten years, the section dedicated to shareholders/financial operators
(“Investor Relations” section) has undergone continuous improvement. For the fourth consecutive year,
Hera’s on-line financial communication rose to the podium of the national Webranking classification, created
by KWD, relating to the major domestic listed companies: in 2012, the Group's site gained the second place,
positioning itself ahead of many larger Italian concerns, and was judged to be the best communication tool
among Italian utilities.
Since its establishment in 2002, Hera has placed special emphasis on direct communication with investors,
by organising Road Shows that present the stock in Italy and abroad (United Kingdom, France, Switzerland,
the Netherlands, Germany, Austria, Scandinavian countries, Belgium, Luxembourg and the United States).
In the first nine months of 2013, Hera organised meetings with European investors, maintaining a number of
contacts in line with previous years. Timely reports and transparent communication have also been
maintained in the 2013 financial year, as a response to the growing sense of uncertainty perceived by
stakeholders in this time of profound systemic discontinuity that our country continues to undergo.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
16
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
17
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.01 Group performance for the nine months ended 30 September 2013:
Group key consolidated data:
(millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % var.
Revenues 3,322.0 3,374.9 +52.9 +1.6%
EBITDA 467.9 14.1% 597.2 17.7% +129.3 +27.6%
Operating profit 236.9 7.1% 294.5 8.7% +57.6 +24.3%
Net profit 76.8 2.3% 172.8 5.1% +96.0 +124.9%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
18
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.01.01 Operating and financial results
The Hera Group’s results for the nine months ended 30 September 2013 were higher than those for the
comparable period in 2012. This was due both to the excellent performance of the Hera Group companies
and to the consolidation of the AcegasAps Group.
Following the business combination, the Hera Group is now the largest domestic operator in terms of waste
treated, the second in integrated water management; the third in gas distribution and the fifth in the sale of
electric energy to final customers.
The period under review was characterized by the following corporate actions:
On 1 August 2013 the Group sold its investment in Hera Servizi Cimiteriali, consolidating this
company’s results until that date.
On 30 September 2013 AcegasAps S.p.A. acquired an additional equity interest in Isontina Reti Gas,
a company engaged in gas distribution services in the province of Gorizia, raising its stake from 30%
to 50%. Further information on the transaction is available in the chapter “Subsequent events”.
As already indicated in previous years, the consolidated income statement reflects the application of IFRIC
12 “Service Concession Arrangements”, which changed the accounting treatment of transactions entered
into by companies that operate under specific concession arrangements. While the application of this
standard did not have any impact on results, it did require the recognition in the income statement of capital
expenditure, but only on network services. Therefore, the income statement shows an increase in other
operating income of €104.4 million (AcegasAps’s input was €23.1 million) for the first nine months of 2013
and an increase of €85.8 million for the same period of 2012 as well as increased operating costs for
services, materials and other operating costs for €82.4 million (AcegasAps’s input was €23.1 million) in 2013
and €62.0 million for the first nine months of 2012.
Hereinafter, for simplicity’s sake, the AcegasAps Group will be referred to as “AcegasAps” and the heritage
Hera Group as “Hera”.
The table below contains the operating results of 2012 and 2013; the adjustments described below were
made to the first nine months of 2012:
1) Starting 1 January 2013 the Hera Group applied IAS 19 revised, which called for the termination of
the so-called “corridor method” to account for actuarial gains and losses. This resulted in a reduction
in personnel costs for €920 thousand, inclusive of the related tax effect recognized under “income
taxes for the period” for €437 thousand.
2) In addition, the income statement for the first nine months of 2012 was restated to take into account
the aborted sale of the Berti Pichat area. This transaction had entailed the recognition of a gain
among “other operating income” for €6,625 thousand. In particular, in light of the restatement, “other
operating income” decreased by the same amount, which caused net profit for the first nine months
of 2012 to drop by €3,282 thousand, after the tax effect of €3,343 thousand accounted for as
“income taxes for the period”.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
19
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Further details are available in the paragraph “Reclassification summary” in the “Explanatory notes” section
of the accounts for the nine months ended 30 September 2013.
Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 3,322.0 0.0% 3,374.9 0.0% +52.9 +1.6%
Other operating revenues 129.0 3.9% 173.7 5.1% +44.7 +34.6%
Raw materials and other materials (2,027.3) -61.0% (1,799.7) -53.3% -227.6 -11.2%
Service costs (664.1) -20.0% (765.6) -22.7% +101.5 +15.3%
Other operating costs (29.0) -0.9% (38.8) -1.2% +9.8 +33.7%
Personnel costs (283.4) -8.5% (358.9) -10.6% +75.5 +26.6%
Capitalised costs 20.7 0.6% 11.6 0.3% -9.1 -44.0%
EBITDA 467.9 14.1% 597.2 17.7% +129.3 +27.6%
Depreciation, Amortisation and Provisions
(231.0) -7.0% (302.6) -9.0% +71.6 +31.0%
Operating profit 236.9 7.1% 294.5 8.7% +57.6 +24.3%
Financial income (expense), net (95.5) -2.9% (112.2) -3.3% +16.7 +17.5%
Other non-operating revenue - 0.0% 74.8 2.2% +74.8 +100.0%
Pre-tax profit 141.4 4.3% 257.2 7.6% +115.8 +81.9%
Tax (64.5) -1.9% (84.3) -2.5% +19.8 +30.7%
Net profit for the period 76.8 2.3% 172.8 5.1% +96.0 +124.9%
Attributable to: Shareholders of the Parent Company 67.3 2.0% 161.6 4.8% +94.3 +140.0% Non-controlling interests 9.5 0.3% 11.2 0.3% +1.7 +17.5%
EBITDA rose from €467.9 million for the first nine months of 2012 to €597.2 million for the first nine months
of 2013 (up 129.3%); EBIT rose from €236.9 million to €294.5 million; pre-tax profit went up by 81.9%, from
€141.4 million to €257.2 million; net profit increased from €76.8 million at the end of the first nine months of 2012 to €172.8 million at the end of the first nine months of 2013, up 124.9%.
Revenues increased by €52.9 million, up 1.6%, going from €3,322.0 million for the nine months ended 30
September 2012 to €3,374.9 million for the first nine months of 2013, due to the combined effects of:
(a) the contribution of AcegasAps for €374.5 million;
(b) a decrease of €321.6 million in Hera’s revenues due mainly to lower gas volumes traded and lower sales
of electricity.
Other revenues grew by €44.7 million, due mainly to AcegasAps’s contribution for €41.6 million.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
20
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
The decrease in Costs of raw and other materials, amounting to €227.6 million, compared with 2012, was
due to the combined effects of:
(a) the increase of €132.3 million determined by the business combination with AcegasAps;
(b) a decrease of €359.9 million due to lower gas trading activities and lower electricity purchase costs, as a
result of a decline in volumes sold.
Other operating costs (Costs for services went up by €101.5 million and Other operating costs by €9.8 million) increased overall by €111.3 million (up 16.1%).Such increase was due nearly entirely to the effect of the business combination with AcegasAps amounted for €111.3 million.
Personnel costs rose by 26.6%, from €283.4 million in the first nine months of 2012 to €358.9 million in the
first nine months of 2013. Of this increase, €70.9 million was attributable to AcegasAps while the remainder
was due to pay raises linked to the national labour agreement, partly offset by a lower average headcount
and changes under the terms of the labour agreement.
The decrease in Capitalised costs, which went from €20.7 million to €11.6 million, was mainly connected to the decrease in work on plants and works by Group companies.
Group consolidated EBITDA for the first nine months of 2013 amounted to €597.2 million, compared with
€467.9 million in the first nine months of 2012, reflecting an increase of €129.3 million (up 27.6%).This
increase was accounted for by the business combination with AcegasAps for €101.6 million and organic
growth by Hera for €27.7 million (up 5.9%). Details are provided in the relevant sections of this report.
Depreciation, amortisation and provisions increased by €71.6 million (up 31.0%), going from €231.0 million for the first nine months of 2012 to €302.6 million for the same period in 2013. The business combination with AcegasAps determined an increase of €50.7 million (up 21.9%). Hera showed an increase of €20.7 million due to: i) the depreciation of new investments and for the expansion of the WTE capacity at the Pozzilli plant; ii) greater provisions made for bad debts; iii) greater depreciation and provisions due to the increase in the depreciation rates of certain capital assets related to the gas concessions.
EBIT in the first nine months of 2013 amounted to €294.5 million, up 24.3% on the comparable period in
2012, for the reasons described above. The effect of the business combination with AcegasAps at 30
September 2013 was €50.9 million.
In the first nine months of 2013, financial expense exceeded financial income by €112.2 million, compared
with €95.5 million in the first nine months of 2012. Continuing the trend shown in the first half of 2013, the
inclusion of AcegasAps in the scope of consolidation accounted for an increase in net financial expense of
approximately €12.5 million.
The difference between financial expense and financial income, which was largely in line with the
comparable year-earlier period, went up as a result of an increase in average indebtedness and, to a limited
extent, to the disposal of the funeral and cemetery assets.
The acquisition of the AcegasAps Group, which took effect as of 1 January 2013, resulted in the recognition
of a gain from a bargain purchase of €74.8 million under other non-recurring non-operating income. This
amount, which is only temporary, resulted from the difference between the purchase price and the fair value
of the acquiree’s net assets. As permitted by IFRS 3, the valuation process is still under way. This means
that there might be further adjustments to the acquired assets and liabilities, which will be recognized
retrospectively at a later stage through profit or loss, with a possible change in the above gain
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
21
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
In light of the above, pre-tax profit went from €141.4 million in the first nine months of 2012 to €257.2 million
in the first nine months of 2013, reflecting an 81.9% increase.
Income tax attributable to the nine months under review amounted to €84.3 million, compared to €64.5
million in 2012. The tax rate was 46.2%, as calculated without considering the extraordinary effects of the
AcegasAps business combination which was accounted for under “Other non-recurring non-operating
income”, compared to 45.6% in the first nine months of 2012.
Net profit for the first nine months of 2013 amounted to €172.8 million, reflecting an increase on the €76.8
million for the nine months ended 3o September 2012. The increase in net profit (up €96.0 million) was due
to: (i) the recognition of a gain from a bargain purchase of €74.8 million; (ii) the business combination with
AcegasAps for €21.1 million and (iii) a €0.1 million increase in Hera’s net profit (up 0.1%).
The amount attributable to the shareholders of the Parent Company amounted to €161.6 million, compared
to €67.3 million for the comparable period in 2012.
The table below provides operating highlights of Hera’s growth, AcegasAps acquisition and the effect on net
profit of the bargain purchase.
Key operating results(millions of euro)
Hera at 30/09/2012
Hera at 30/09/2013
Var. Abs. Hera
AcegasAps at
30/09/2103
Group at 30/09/2013
Group Abs. Var.
Group % Var.
EBITDA 467.9 495.6 +27.7 101.6 597.2 +129.3 +27.6%
Operating profit 236.9 243.7 +6.8 50.9 294.5 +57.6 +24.3%
Adjusted pre-tax profit 141.4 144.0 +2.6 38.4 182.4 +41.0 +29.0%
Adjusted net profit 76.8 76.9 +0.1 21.1 98.0 +21.2 +27.6%
Other non-operating income (bargain purchase) - 74.8 +74.8 - 74.8 +74.8 +100.0%
Net profit for the period 76.8 151.7 +74.9 21.1 172.8 +96.0 +124.9%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
22
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Investing activities
Group investments, including those of the AcegasAps Group, amounted to €194.6 million.
Hera’s capital expenditure amounted to €163.1 million, compared to €183.8 million in the first nine months of
the previous year while its equity investments amounted to €0.4 million.
In the period under review AcegasAps made equity investments for €31.1 million.
The table below lists the investments before disposals, for the reference period, by business sector:
Total Investments(millions of euro)
30-Sep-12 30-Sep-13 Abs. Var. %Var.
Gas segment 27.2 33.6 +6.4 +23.5%
Electricity segment 13.1 14.2 +1.1 +8.4%
Integrated water cycle segment 60.5 68.1 +7.6 +12.6%
Waste management segment 31.6 32.7 +1.1 +3.5%
Other services segment 8.6 13.7 +5.1 +59.3%
Central structure 42.9 31.9 -11.0 -25.6%
Total capital expenditure 183.8 194.2 +10.4 +5.7%
Total financial investments 0.0 0.4 +0.4 +0.0%
Total 183.8 194.6 +10.8 +5.9%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Investments in the gas segment amounted to €33.6 million, including €9.6million by AcegasAps.
Gas (millions of euro)
30-Sep-12 30-Sep-13 Abs. Var. % Var.
Networks 20.1 28.4 +8.3 +41.3%
District heating/Heat management 7.0 5.2 -1.8 -25.7%
Other 0.1 0.0 -0.1 -100.0%
Total Gas 27.2 33.6 +6.4 +23.5%
Hera’s investments fell by €3.2 million compared to the first nine months of 2012,mainly due to the
completion of important works on the gas distribution service: i) the Cabin I° salto Borgo Masotti Ravenna,
(ii) refurbishment of the district cabin in viale Berti Pichat, Bologna, and iii) GRF in piazza Garibaldi in
Ravenna, and the decrease in works to expand the grid.
District heating saw the reduction of investments for €1.5 million, following a decrease in non-routine
maintenance, mostly on district heating systems in Bologna and Ferrara, as well as the work scheduled to
take place in the last quarter of 2013 to complete the Bufalini plant in Cesena and the TLR system in
Castelmaggiore. Upgrading work under law 155/08 (massive meter replacement) featured a stepped up
pace, with an increase of 1.2 million on the comparable period of 2012. The continuing effect of the overall
economic conditions caused new connections in gas to fall by €0.4 million and in district heating to decline
by €0.3 million.
AcegasAps invested €9.6 million in the gas area, mostly to comply with the new regulations calling for the
replacement, on the grid, of the pig iron pipelines in Trieste for e6.3 million, as well as connections for €1.6
million and investments in the Bulgarian subsidiary, RilaGas.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
24
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Investments in the electricity segment amounted to e14.2 million, of which €4.5 million by AcegasAps.
Electricity (millions of euro)
30-Sep-12 30-Sep-13 Abs. Var. % Var.
Networks 9.7 13.5 +3.8 +39.2%
Heat production plant Imola 3.1 0.0 -3.1 -100.0%
Industrial cogeneration 0.2 0.7 +0.5 +250.0%
Total Electricity 13.1 14.2 +1.1 +8.4%
Hera’s investments, amounting to €9.7 million, concerned the extension of the service, extraordinary
maintenance on distribution networks and plants around Modena and Imola, and network support services.
They fell by €3.4 million, compared with the same period in the previous year, due mainly to the activities
conducted in electricity and heat production plants (CCGT Imola) in 2012, to the slowdown of new
connections (down €1.0 million) and for the completion of the massive meter replacement with the new
electronic meters. Lastly, a significant activity began on the new AT-MT station in via Selice in Imola.
AcegasAps Group invested a total of €4.5 million, concerning mainly the grid for €2.0 million, technological
equipment for €1.9 million, as well as new connections.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
25
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
With respect to the Integrated Water Cycle, investments related mainly to extensions, remediation and
upgrading of networks and plants as well as regulatory compliance, particularly for purification and sewerage
systems. Overall, total investments in the Water Cycle amounted to €68.1 million, of which €9.7 million by
AcegasAps.
Integrated water cycle(millions of euro)
30-Sep-12 30-Sep-13 Abs. Var. % Var.
Mains water 31.0 37.3 +6.3 +20.3%
Purification 15.5 11.9 -3.6 -23.2%
Sewerage 13.9 18.8 +4.9 +35.3%
Total Integrated Water Cycle 60.5 68.1 +7.6 +12.6%
The €2.1 million decrease recorded by Hera, compared to the corresponding period of 2012, concerned: i)
the purification sector, which was down €0.4 million, mainly due to a change in the investment schedule; ii)
the water main sector, which was up €0.7 million, even though the adverse weather conditions in the first half
of the year caused several delays in work activities; iii) the sewerage sector, which was up €1.6 million,
where works were performed to upgrade the sewers as per Legislative Decree no. 152/2006, after the
designs had been completed in 2012. In addition, the continuing crisis in the real estate sector continued to
determine fewer connection applications.
AcegasAps invested €9.7 million in the Integrated Water Cycle area - including €5.7 million in water mains,
€3.3 million in sewerage and €0.7 million in purification. These investments concerned grid maintenance,
plant investments and over 2.2 million new connections.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
26
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Investments in waste management, to maintain and upgrade existing plants, amounted to €32.7 million, of
which €1.5 million by AcegasAps.
Waste management (millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Waste composting/Digesters 10.1 5.3 -4.8 -47.5%
Landfills 5.8 7.5 +1.7 +29.3%
WTE 5.8 8.8 +3.0 +51.7%
Special Waste plants 4.1 2.3 -1.8 -43.9%
Market 0.6 0.3 -0.3 -50.0%
Drop-off point and collecting equipment 3.2 2.4 -0.8 -25.0%
Transshipment, screening and other equipment 2.1 6.1 +4.0 +190.5%
Total Waste Management 31.6 32.7 +1.1 +3.5%
In particular, concerning Hera’s investments in the various businesses in this segment attention is called to:
the decrease in investments in composting and digestion (down €4.8 million), including the construction of
dry-fermentation plants in Rimini and Lugo, which are close to completion; the increase in investments in
landfills (up €1.7 million), where completion of the 7th sector of the Ravenna landfill and completion of the
rainwater collection tanks replaced the waterproofing, preparation and road construction for the landfills of
Tre Monti and Pago in 2012; the increase of investments in the WTE sector (up €2.0 million), reflecting the
expansion of the plant base, with the Pozzilli plant, and a reduction of other investments mainly due to the
revamping of the pre-screening plant in Forlì, which in 2013 is nearing completion; the reduction of
investments in special waste plants (down €1.8 million), mainly due to the construction of the mud
dehydration plant in Ravenna, which is nearing completion, and the maintenance and upgrading for
regulatory compliance carried out in 2012; greater investments in the screening plants (up €4.0 million) for
the revamping of the plant in Modena and ground-breaking for the construction of the plant in Bologna, both
managed by Akron.
In this area, AcegasAps invested a total of €1.5 million, of which €1.0 million in the WTE sector and €0.5
million in collection equipment.
Investments in Other services amounted to €13.7 million, of which €5.7 million made by AcegasAps.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
27
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Hera invested €6.8 million in the area of Telecommunications, consisting of investments in networks, TLC
and IDC, while “Other” in the previous year included investments in cemetery services.
AcegasAps invested €5.7 million, which concerned mainly the investments of the Sinergie subsidiaries.
Other services(millions of euro)
30-Sep-12 30-Sep-13 Abs. Var. % Var.
TLC 6.3 6.8 +0.5 +7.9%
Public Lighting and Traffic lights 0.9 1.2 +0.3 +33.3%
Other 1.4 5.7 +4.3 +307.1%
Total Other services 8.6 13.7 +5.1 +59.3%
Investments by corporate headquarters - which concerned construction of new premises upgrading of information systems and maintenance of the fleet - have decreased overall, compared with the first nine
months of 2012. Other investments include work on the completion of laboratories of remote-monitoring
units.
Corporate structure(millions in euro)
30-Sep-12 30-Sep-13 Abs. Var. % Var.
Property 23.6 13.4 -10.2 -43.2%
Information systems 10.4 9.6 -0.8 -7.7%
Fleets 7.3 7.3 +0.0 +0.0%
Other investments 1.5 1.6 +0.1 +6.7%
Total Corporate Structure 42.9 31.9 -11.0 -25.6%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
28
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03 Analysis by business segment
A breakdown of the operating results achieved in the business segments in which the Group operates is
given below: (i) the Gas segment, which includes methane gas and LPG distribution and sales services,
district heating and heat management; (ii) the Electricity segment, which includes electricity production,
distribution and sales services; (iii) the Integrated Water Cycle segment, which includes water mains,
purification and sewage services; (iv) the Waste Management segment, which includes waste collection,
treatment and disposal services; and (v) the Other Services segment, which includes Public Lighting,
Telecommunications and other minor services.
In the light of the above, the breakdown and the development of Revenues and EBITDA over the years are
shown in the graphs below:
Breakdown of Hera’s business portfolio
REVENUES
EBITDA
30 September 2012 30 September 2013
30 September 2012 30 September 2013
Gas
34.9%
EE
35.7%
Other
services
2.0%
Waste
management
14.8%Water
12.7%
Gas
33.4%
Water
14.2%
Waste
management
16.6%
Other
services
2.2%
EE
33.6%
Gas
34.0%
Water
25.4%
Waste
management
28.0%
Other
services
2.8%
EE
9.8%
Gas
31.7%
Water
26.6%
Waste
management
28.7%
Other services
2.1%
EE
11.0%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
29
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Breakdown of the Group’s business portfolio
The following sections present the operating results by business segment. Hera’ income statement includes overhead costs, comprising intercompany transactions carried out at arm’s length. To ensure greater transparency with respect to AcegasAps, use has been made of the same business segment breakdown. For simplicity’s sake, the “Corporate structure” has been accounted for in the area “Other services”.
In 2013 the merger of AcegasAps will be completed and the presentation of the business segments will be
adjusted accordingly.
The analysis by business segment takes into consideration the value of the increased revenues and increased costs, without an impact on EBITDA, relating to the application of IFRIC 12, as explained in the Group's Consolidated Income Statement. The business sectors affected by the application of the above principle are: methane gas distribution services, electricity distribution services, all integrated water cycle services and public lighting services.
Following the adjustments made to the income statement for the nine months ended 30 September 2012
shown above, also the income statements of the business segments were adjusted accordingly.
REVENUES
EBITDA
30 September 2012 30 September 2013
30 September 2012 30 September 2013
Gas
32.6%
Water
14.9%
Waste
management
17.3%
Other
services
3.8%
EE
31.5%
Gas
31.2%
Water
28.6%
Waste
management
29.2%
Other
services
0.5%
EE
10.5%
Gas
34.9%
EE
35.7%
Other
services
2.0%
Waste
management
14.8%Water
12.7%
Gas
34.0%
Water
25.4%
Waste
management
28.0%
Other
services
2.8%
EE
9.8%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
30
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03.01 Gas segment
In the first nine months of 2013, the Gas segment showed an increase on the comparable period in 2012 in
terms of absolute contribution to the Group’s EBITDA. The business combination with AcegasAps
determined a decrease of 2.8% of the gas segment’s share of total EBITDA. Without the effects of the
business combination, the share of the gas segment, in percentage terms, would be 2.3% lower
(millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Hera EBITDA 159.3 157.0 -2.3 -1.5%
AcegasAps EBITDA - 29.3 +29.3 +100.0%
Group's EBITDA 159.3 186.3 +27.0 +17.0%
Consolidated EBITDA 467.9 597.2 +129.3 +27.6%
Percentage weight 34.0% 31.2% -2.8 p.p.
The following table contains the main quantitative indicators for the segment:
Quantitative data 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Volumes of gas distributed (millions of cubic metres) 1,569.6 1,951.5 +381.9 +24.3%
Volumes of gas sold (millions of cubic metres) 2,551.8 2,256.7 -295.1 -11.6%
- of which trading volumes 1,141.8 695.6 -446.2 -39.1%
Volumes of heat supplied (Gwht) 357.3 360.0 +2.7 +0.8%
Distributed volumes went from 1,569.8 million cubic metres for the first nine months of 2012 to 1,951.5
million cubic metres in the nine months ending 30 September 2013, reflecting an increase of 381 million
cubic metres (up 24.3%); such increase was due to the contribution of AcegasAps for 373.8 million cubic
metres and a rise of 8 million cubic metres in Hera’s distributed volumes, which was slightly down compared
to the national distribution average (up 3.0% on September 2012).
Gas sales volumes went from 2,551.8 million cubic metres in the first nine months of 2012 to 2,256.7 million
cubic metres in the period under review, with a drop of €295.1 million cubic metres (down 11.6%). This was
due to the combined effects of:
a) the business combination with AcegasAps for 143.0 million cubic metres;
b) a substantial decline in trading volumes (down 39.1%), due to lower volumes for the thermoelectric
market and the progressive alignment of prices at the virtual trading point (VTP) with those at the
northern European hubs in the wholesale market;
c) slight increase in volumes sold by Hera to final customers (up 8.1 million cubic metres, up 0.6%).
Volumes of heat supplied went from 357.3 GWht in the first nine months of 2012 to 360.0 GWht for the nine
months ended 30 September 2013 (up 0.8%). The business combination with AcegasAps accounted for 4.7
GWht while Hera’s share was slightly down for the previous year (down 2.0; down 0.5%).
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Operating results for the segment are summarized below: Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 1,254.2 1,194.4 -59.8 -4.8%
Operating costs (1,045.2) -83.3% (941.2) -78.8% -104.0 -10.0%
Personnel costs (55.2) -4.4% (69.8) -5.8% +14.6 +26.5%
Capitalised costs 5.4 0.4% 3.0 0.3% -2.4 -44.2%
EBITDA 159.3 12.7% 186.3 15.6% +27.0 +17.0%
Group revenues, which were down from €1,254.2 million in the first nine months of 2012 to €1,194.4 million for the nine months ended 30 September 2013 decreased by €59.8 million (down 4.8%), due mainly to:
a) integration of AcegasAps for €112.8 million; b) lower revenues linked to the trading activity for €180.2 million due to the aforementioned
decrease in volumes; c) higher revenues for sales to end customers both for the higher volumes sold; d) lower revenues from connections.
The aforementioned lower Trading operations are also reflected in the lower operating costs, despite the integration of AcegasAps, which contributed a change of €73.5 million: in fact, Hera's operating costs fell by €177.5 million, in line with revenues.
Hera’s EBITDA decreased by €2.3 million (down 1.5%), from €159.3 million to €157.0 million, due to : (i) lower revenues from connections; (ii) lower trading margins; (iii) lower margins due to the different regulatory and market context for Energy Efficiency Certificates. These events were partly offset by higher selling margins, due to greater sales volumes, and higher district heating margins, due to savings achieved on purchases of heat production gas and heat. For the first nine months of 2013, integration with AcegasAps contributed to the EBITDA of the Group's Gas segment for €29.3 million. Compared to the same period in 2012, AcegasAps showed an increase of €0.6 million (up 2.2%), mainly due to the positive contribution of the Gas sales business, thanks to better purchase conditions for raw materials, despite a decrease in the distribution service due to certain extraordinary items attributable to previous fiscal years.
The overall volumes sold by the AcegasAps group amounted to 143.0 million cubic metres compared to 148.1 million in the first nine months of 2012; the reduction in 5.1 million cubic metres (down 3.5%) can be attributed to the loss of some big customers that were no longer considered profitable and the milder weather conditions, in the reference territory, compared to the same period of 2012. The volumes distributed by AcegasAps rose by 5.9%, from €352.9 million cubic metres to 373.8 million cubic metres, due to the mentioned increase of the equity investment in the Gorizia company.
EBITDA in the Group's total Gas segment therefore increased by €27.0 million (up 17.0%), from €159.3 million to €186.3 million.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
32
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03.02 Electricity segment
At the end of the first nine months of 2013, the Electricity Segment showed improvement compared to the same period in 2012, both for Hera and for the integration of AcegasAps, as shown in the table below:
(millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Hera EBITDA 46.0 54.3 +8.3 +18.0%
AcegasAps EBITDA - 8.5 +8.5 +100.0%
Group's EBITDA 46.0 62.8 +16.8 +36.5%
Consolidated EBITDA 467.9 597.2 +129.3 +27.6%
Percentage weight 9.8% 10.5% +0.7 p.p.
The quantitative data for this business, which do not include trading volumes, are shown in the table below:
Quantitative data 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Volumes sod (Gw/h) 7,301.1 7,136.5 -164.6 -2.3%
Volumes distributed (Gw/h) 1,672.5 2,207.1 +534.6 +32.0%
The volumes sold by the Electricity Segment were down from 7,301.1 GWh in the first nine months of 2012 to 7,136.5 for the nine months ended 30 September 2013, with a 2.3% decrease. The integration of AcegasAps, equal to 370.2 Gwh offset in part Hera's decrease (down 534.8 GWh; down 7.3%), due to the permanent low level of demand for electricity in Italy (-3.7%), despite an improvement in the number of customers (up 9.0%) compared to the same period the previous year.
The distributed volumes were up by 32.0%; AcegasAps' contribution is equal to 582.9 GWh while Hera showed a decrease of 48.3 Gwh (down 2.9%) due to the aforementioned slowdown in consumption.
The main results of the segment are given below:
Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 1,282.3 1,151.6 -130.7 -10.2%
Operating costs (1,223.6) -95.4% (1,069.6) -92.9% -154.0 -12.6%
Personnel costs (18.5) -1.4% (23.7) -2.1% +5.2 +28.1%
Capitalised costs 5.8 0.5% 4.6 0.4% -1.2 -20.6%
EBITDA 46.0 3.6% 62.8 5.5% +16.8 +36.5%
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Revenues were down from €1,282.3 million in the first nine months of 2012 to €1,151.6 million in the same period of 2013, with a 10.2% decrease, due mainly to:
a) integration of AcegasAps for €65.6 million; b) lower revenues linked to trading operations and lower revenues for sales to end customers both due
to lower volumes sold and the decrease in the price of raw materials for a total of €185.6 million; c) Lower revenues in relation to the production of electricity.
Net of the share relating to AcegasAps for €51.8 million, Hera's operating costs decreased by €205.7 million (down 16.8%), more than offsetting the lower revenues for sales to end customers and trading.
Hera's EBITDA increased by €8.3 million (up 18.0%), increasing from €46.0 million to €54.3 million thanks to greater margins on sales and trading operations, which offset the lower margins for the electricity production.
AcegasAps contributed €8.5 million to the segment’s EBITDA for the first nine months of 2013.
Compared to the first nine months of 2012, AcegasAps fell by €1.4 million (down 14.5%), due mainly to
fewer connection applications and lower revenues from electricity distribution.
The quantities sold by the AcegasAps Group fell compared to the first nine months of 2012, decreasing from 666.9 GWh to 370.2 GWh, following both the loss of clients from the CEV consortium (municipalities of the Veneto consortium, with about 32,000 users) and the decrease in demand. The distributed volumes confirmed the reduction trend shown previously, decreasing from 609.6 Gwh to 582.9 GWh (down 4.4%)
EBITDA for the Group went from €46.0 million on 30 September 2012 to €62.8 million for the nine months ended 30 September 2013, with an increase of €16.8 million (up 36.5%).
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
34
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03.03 Integrated water cycle segment
For the nine months ended 31 March 2013, this segment showed an increase on the comparable period of
the previous year, due both to the business combination with AcegasAps and Hera’s organic growth:
(millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Hera EBITDA 118.7 131.9 +13.2 +11.1%
AcegasAps EBITDA - 38.7 +38.7 +100.0%
Group's EBITDA 118.7 170.6 +51.9 +43.7%
Consolidated EBITDA 467.9 597.2 +129.3 +27.6%
Percentage weight 25.4% 28.6% +3.2 p.p.
An analysis of the operating results in the segment is given below:
Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 457.3 543.8 +86.5 +18.9%
Operating costs (259.9) -56.8% (281.9) -51.8% +22.0 +8.5%
Personnel costs (81.3) -17.8% (92.6) -17.0% +11.3 +13.9%
Capitalised costs 2.7 0.6% 1.2 0.2% -1.5 -56.3%
EBITDA 118.7 26.0% 170.6 31.4% +51.9 +43.7%
Group revenues rose by €86.5 million (up 18.9%), due to the integration of AcegasAps, which accounted for
€83.8 million, and to an increase in Hera’s revenues of €2.8 million (up 0.6%) due to: lower revenues from
connections, owing to the on-going crisis in the construction sector; (ii) lower revenues determined by the
application of IFRIC 12 in the amount of €2.9 million; and (iii) greater revenues from sales due to the
application of the tariffs agreed upon with the local authorities which are expected to be raised in such a way
as to cover costs fully.
Hera’s operating costs fell by 4.8% from the comparable amount in 2012 due to the lower costs resulting from the application of IFRIC 12 and lower extraordinary costs, compared to the water shortage in the summer of 2012. Integration with AcegasAps produced costs for €34.4 million and therefore the group's operating costs were equal to €281.9 million euros, an 8.5% increase compared to 30 September 2012.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
35
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
The following table shows the main quantitative indicators for the segment.
Quantitative data 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Volumes sold (millions of cubic metres)
Mains water 195.7 226.8 +31.1 +15.9%
Sewerage 169.7 190.5 +20.8 +12.3%
Purification 168.3 188.3 +20.0 +11.9%
The Group's volumes increased thanks to the integration of AcegasAps with its 42.7 million cubic metres of Water mains, 28.7 cubic metres of sewerage and 28.6 cubic metres of purification; net of this change, Hera's water volumes decreased by 5.9%, its sewerage volumes by 4.6% and purification volumes by 5.1% both due to the higher level of rainfall in the first half of 2013 and the decrease in consumption.
Hera's EBITDA increased by €13.2 million (up 11.1%), from €118.7 million to €131.9 million thanks to higher revenues, following the application of agreed tariffs that provide for convergence towards full coverage of operating costs, despite the lower revenues from connections.
For the first six months of 2013, AcegasAps contributed to the EBITDA of the Group's Gas segment for €38.7 million. Compared to the same period of 2012, AcegasAps had an increase of €7.3 million (up 23.4%) benefiting from the planned tariff revisions and greater operating efficiencies.
The quantities sold in the first nine months of 2013 were down by 1.0 million cubic metres, compared to the same period in 2012, going from 43.7 million cubic metres to 42.7 million cubic metres.
Therefore, the Group's EBITDA was €170.6 million for the nine months ended 30 September 2013, compared to €118.7 million the previous year, with an increase of €51.9 million (up 43.7%).
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
36
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03.04 Waste management segment
This segment reported an improved EBITDA margin, as shown in the table below, due both the effect of the
business combination with AcegasAps and Hera’s organic growth:
(millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Hera EBITDA 130.8 142.0 +11.2 +8.6%
AcegasAps EBITDA - 32.6 +32.6 +100.0%
Group's EBITDA 130.8 174.6 +43.8 +33.5%
Consolidated EBITDA 467.9 597.2 +129.3 +27.6%
Percentage weight 28.0% 29.2% +1.2 p.p.
The Group is an integrated operator in the entire waste cycle, with facilities that include 81 urban and special waste treatment and disposal plants operated by Herambiente, 3 plants operated by the Marche Multiservizi Group and the two WTE plants obtained with the merger with AcegasAps. In October 2012, the Herambiente Group expanded its WTE operations by adding a WTE plant in the municipality of Pizzoli, in the province of Isernia.
Analysis of the operating results achieved in the Waste Management segment is shown below:
Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 531.7 633.8 +102.1 +19.2%
Operating costs (290.8) -54.7% (324.9) -51.3% +34.1 +11.7%
Personnel costs (115.4) -21.7% (136.6) -21.5% +21.2 +18.4%
Capitalised costs 5.3 1.0% 2.2 0.4% -3.1 -58.7%
EBITDA 130.8 24.6% 174.6 27.5% +43.8 +33.5%
The Group’ revenues for the nine months ended 30 September 2013 showed a €102.1 million increase (up 19.2%) compared with the same period of the previous year, going from €531.7 million to €633.8 million, with the AcegasAps accounting for €96.6 million. Without considering the effects of the business combination, Hera’s increase was due to: (i) increase in the number of plants; (ii) greater quantities handled; and (iii) lower average waste disposal prices due to the fierce competition in the market for industrial waste.
Hera saw its sorted waste collection rise as a percentage share of total volumes collected from 50.1% in the
first nine months of 2012 to 53.0% in the nine months ended 30 September 2013. AcegasAps share of
sorted waste collection at 30 September 2013 was 42.5%, compared to 41.3% for the same period of 2012.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Below is a breakdown on the volumes marketed and treated by Hera in the first nine months of 2013, compared with the same period in 2012:
Quantitative data (thousands of tonnes) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Urban waste 1,306.1 37.4% 1,502.0 32.6% +195.9 +15.0%
Market waste 1,086.6 31.1% 1,377.1 29.9% +290.5 +26.7%
Waste marketed 2,392.7 68.5% 2,879.1 62.4% +486.4 +20.3%
Plant by-products 1,101.2 31.5% 1,733.6 37.6% +632.4 +57.4%
Waste treated by type 3,493.9 100.0% 4,612.7 100.0% +1,118.8 +32.0%
Landfills 882.2 25.2% 907.1 19.7% +24.9 +2.8%
Waste-to-energy plants 697.2 20.0% 1,048.2 22.7% +351.0 +50.3%
Selecting plant and other 233.5 6.7% 279.2 6.1% +45.7 +19.6%
Composting and stabilisation plants 354.3 10.1% 370.4 8.0% +16.1 +4.5%
Stabilisation and chemical-physical plants 538.8 15.4% 826.1 17.9% +287.3 +53.3%
Other plants 787.9 22.6% 1,181.8 25.6% +393.9 +50.0%
Waste treated by plant 3,493.9 100.0% 4,612.7 100.0% +1,118.8 +32.0%
Analysis of the quantitative data shows a 20.3% increase in waste marketed by the Group; integration with AcegasAps contributed 347.0 thousand tonnes, thanks to 189.5 thousand tonnes of urban waste and 157.5 thousand tonnes of market waste. The 139.4 thousand tonne increase in Hera waste can be attributed to greater urban waste (6.3 thousand tonnes; up 0.5%) and to greater quantities from the market (133.0 thousand tonnes; up 12.2%) thanks to strong marketing effort and a widening of the plant base. The increase in by-products from plants, on the other hand, was affected by the weather conditions: specifically, the greater rainfall in the first quarter of 2013 compared with the same period in the previous year caused a greater production of leachate. As to waste disposal by plant, the waste increase had an impact on all the sectors, particularly the WTE one – which rose by 253.6 thousand tonnes due 6to the two WTE plants owned by AcegasAps - and the waste sorting area, following the increase in sorted waste collection, as well as on the inertization plants, for the increase in the production of by-products and the merger with AcegasAps.
Hera's EBITDA increased by €11.2 million (up 8.6%), from €130.8 million to €142.0 million in the first nine months of 2013, mainly thanks to an increase in the plant perimeter and greater revenues from waste disposal activities.
For the first nine months of 2013, integration with AcegasAps contributed to EBITDA of the Group's Waste Management segment for €32.6 million. Compared to the same period in 2012, AcegasAps increased by €3.3 million (up 11.2%) both thanks to increased rates for the waste collection and disposal service, negotiated with local public bodies, and the lower operating costs for WTE plants and the higher quantities of disposed of waste. Waste marketed by AcegasAps increased by 3.0 thousand tonnes, going from 344.0 thousand tonnes to 347.0 thousand tonnes, showing a decrease in urban waste (down 4.3 thousand tonnes) and an increase in market waste (up 7.3 thousand tonnes).
The Group's EBITDA therefore increased by €43.8 million (up 33.5%) on the comparable amount at 31 September 2012, going from €130.8 million euros to €174.6 million in 2013.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
38
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.03.05 Other services segment
At the end of the first nine months of 2013, the result for the Other Services segment showed a decrease compared with the same period in the previous year, with EBITDA going from €13.1 million to €2.8 million. It is worthy of note that the segment “Other services” of AcegasAps reflects – in addition to public lighting,
telecommunications and cemetery services - also the allocation of corporate management costs.
(millions of euro) 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Hera EBITDA 13.1 10.5 -2.6 -19.9%
AcegasAps EBITDA - (7.6) -7.6 +100.0%
Group's EBITDA 13.1 2.8 -10.3 -78.3%
Consolidated EBITDA 467.9 597.2 +129.3 +27.6%
Percentage weight 2.8% 0.5% -2.3 p.p.
The table below summarizes the main operating figures for the segment:
Income statement (millions of euro) 30-Sep-12 % Inc. 30-Sep-13 % Inc. Abs. Var. % Var.
Revenues 71.3 137.7 +66.4 +93.1%
Operating costs (46.7) -65.5% (99.2) -72.1% +52.5 +112.4%
Personnel costs (13.0) -18.3% (36.3) -26.3% +23.3 +178.7%
Capitalised costs 1.5 2.1% 0.7 0.5% -0.8 -54.3%
EBITDA 13.1 18.3% 2.8 2.1% -10.3 -78.3%
The Group's revenues increased by €66.4 million. This was due to the combined effect of a €67.4 million increase contributed by AcegasAps and Hera’s €1.0 million decrease in revenues. Concerning Hera, in particular, the greater revenues for telecommunications offset the lower revenues of the public lighting service and cemetery services, due to the sale of the companies devoted to these activities.
The increase in operating and staff costs of €75.8 million is due to the integration of AcegasAps for €75.1 million and for €0.7 million to Hera.
Hera's 1.6 million euro fall in margins was due mainly to the public lighting Business, which suffered from the termination of some service supply contracts and lower awards for work due to pressures on municipal budgets and the mentioned disposal of the cemetery business.
The Group's main operating indicators, contained in the table below, show an increase of 145.7 thousand lighting points for 61 served municipalities, mainly for the integration of AcegasAps (174.9 thousand lighting points for 65 served municipalities), despite the loss of some Hera municipalities compared to the first nine months of 2012.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Quantitative data of Hera 30-Sep-12 30-Sep-13 Abs. Var. % Var.
Public lighting
Lighting points (thousands) 295.8 441.5 +145.7 +49.3%
Municipalities served 58.0 119.0 +61.0 +105.2%
For the first nine months of 2013, integration with AcegasAps consolidated a loss of €7.6 million regarding the Other Services area, due to the sum of own margin for Other Services of €9.3 million and the allocation of management costs for €16.9 million.
It should be mentioned that the result for the AcegasAps segment, compared to the same period in 2012, has improved by €3.3 million mainly thanks to the cost efficiencies in operational activities and a reduction in staff costs.
Therefore, the Group's EBITDA was €2.8 million for the nine months ended 30 September 2013, compared to €13.1 million the previous year, with a reduction of €10.3 million.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
40
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.04 Analysis of net borrowings
The table below provides details of the composition of, and changes in, net borrowings:
At 30 September 2013 net borrowings amounted to €2,776.4 million, compared to €2,216 million at 31
December 2012. The increase in net borrowings was due to the inclusion of the AcegasAps Group in Hera’s
scope of consolidation.
The indebtedness was mainly made up of medium/long-term borrowings, which account for approximately
78% of total debt, thus matching the long-term nature of the Group’s assets, which include mostly property, plant and equipment. The Group’s financial structure changed after 30 September 2013.
In fact, on 1 October 2013 The convertible “€140,000,000 1.75 per cent. Equity Linked Bonds due 2013” was
repaid while a new €500 million bond was issued on 4 October 2013. On 30 September 2013 a €200 million
loan was received from the European Investment Bank (EIB) to support the investment plan. (Reference is
made to paragraph 1.06 for further details of subsequent events).
Hera Spa has long-term rating of "Baa1" by Moody's, with negative outlook, and "BBB" by Standard &
Poor's, with stable outlook.
millions of euros30 September
201331 December
2012
a Cash 484.9 424.2
b Other current financial receivables 62.5 47.3
Current bank debt (378.7) (74.7)
Current portion of bank debt (291.5) (225.7)
Other current financial liabilities (81.4) (17.1)
Finance lease payables due within 12 months (2.6) (3.8) c Current financial debt (754.2) (321.3)
d=a+b+c Net current financial debt (206.8) 150.2
e Non-current financial receivables 46.4 17.6
Non-current bank debt and bonds issued (2,593.3) (2,371.0)
Other non-current financial liabilities (9.9) 0
Finance lease payables due after 12 months (12.8) (13.4)
f Non-current financial debt (2,616.0) (2,384.4)
g=e+f Net non-current financial debt (2,569.6) (2,366.8)
h=d+g Net financial debt (2,776.4) (2,216.6)
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
41
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.05 Human resources
31‐Dec‐12 30‐Sep‐13 Var.
Senior managers 133 155 22
Middle managers 363 460 97
Office workers 3,397 4,235 838
Manual workers 2,646 3,429 783
Total 6,539 8,279 1,740
Work force as at 31 December 2012 6,539
Joined 89
Left ‐61
Net flows 28
Variation in the scope of consolidation (Acegas‐Aps, Hera Servizi Cimiteriali/Hera Servizi Funerari) 1,712
Work force as at 30 September 2013 8,279
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
42
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
1.06 Subsequent events
Rights issue for up to 78,466,539 ordinary Hera shares. A rights issue is currently under way, following the resolution adopted by Hera S.p.A.’s Board of Directors, under the authority granted by the body of shareholders in the General Meeting held on 15 October 2012. On 24 October 2013, Hera S.p.A.’s Board of Directors - following clearance for publication of the Prospectus related to the capital increase by Consob on 23 October 2013 - set the final terms and conditions of the rights offer. Consequently, considering the subscription price and the maximum number of shares that can be issued – i.e. up to 78,466,539 – the capital increase should amount up to €98,083,173.75, inclusive of a share premium of Euro 19,616,634.75. Thus, based on the Board of Directors’ resolution, on 28 October 2013 the offer period began and rights could be exercised until 19 November while rights trading in the stock market ended on 12 November 2013. The final results of the offer period will be disclosed within five days, together with the terms and conditions whereby the Company will offer all the unopted rights for at least five trading days. Pursuant to the agreement between Hera and Fondo Strategico Italiano S.p.A., this Fund undertook to make an offer for all the rights attributable to shareholders selected by Hera and to subscribe directly to all the shares corresponding to all unopted rights at the end of the stock market offer at the same offer price Transactions related to the companies in the Gorizia area
On 30 September 2013, AcegasAps and ENI S.p.A. signed (i) an agreement whereby ENI S.p.A. would sell
to AcegasAps 20% of Isontina Reti Gas, in a transaction that has already been described in this quarterly
report, (see paragraph 1.01.01 on operating and financial results) and (ii) a framework agreement
concerning the reorganization of the Group’s investee companies operating in the Province of Gorizia. This
agreement calls for ENI S.p.A. to purchase the 30% of Est Più S.p.A. held by AcegasAps, which in turn will
buy the 70% of Est Reti Elettriche S.p.A. held by ENI S.p.A.. Considering the prices of the assets involved,
AcegasAps will pay a cash balance of approximately €8 million. These agreements will take effect subject to
antitrust approval. Upon completion of both transactions, each of AcegasAps ad ENI S.p.A. will hold 50% of
Isontina Reti Gas; on the other hand, AcegasAps will hold 100% of Est Reti Elettriche S.p.A. while ENI
S.p.A. will hold 100% of Est Più S.p.A.
The framework agreement provides also for ENI S.p.A.’s option, to be exercised by 31 December 2013, to
sell its 50% stake in Isontina to Italgas S.p.A.. In the event that such a sale does not materialize by 31
December 2013, AcegasAps may purchase the 50% stake in Isontina by no later than 30 April 2014. The
exercise price of AcegasAps’s call option will be equal to the net asset value, plus an additional sum if the
call option is exercised after 28 February 2014. The overall purchase price, including the option price, once it
is completed, will be approximately €30 million.
Investment in Energia Italiana
With reference to Energia Italiana S.p.A. (a vehicle through which 50% of Tirreno Power S.p.A. is held) - of
which the Hera Group owns 11%, for a total amount of €13.2 million – it is worthy of note that the
unfavourable market conditions for electricity generation in Italy prompted management to start a test on the
recoverable amount of the investment in Tirreno Power S.p.A.. As of this writing, no detailed information is
available. For this reason Hera S.p.A.’s management feels that it does not have enough information to
calculate any impairment charges for this investment. Consequently, no adjustments were made to the
carrying amount of the investment.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Convertible bond
On 1 October 2013, the convertible “€140,000,000 1.75 per cent. Equity Linked Bonds due 2013” was
repaid.
Note issue
On 4 October 2013, the Hera Group approved the issue of Notes for the principal amount of €500 million
under the existing Euro Medium term Notes program as follows: maturity October 2021, 3.25% coupon and
3.337% annual yield, with listing on the Luxembourg stock exchange.
EIB loan
On 30 September 2013, the Hera Group signed a loan agreement with the European Investment Bank (EIB)
for a total of €200 million, to fund its investment plans.
This loan has a 15-year tenor, with an early repayment date on 15 October 2017, maturity in October 2028
and an interest rate of 0.79% over 6-month Euribor.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
45
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01 Consolidated financial statement
2.01.01 Consolidated income statement
thousands of euros30 September
2013
30-set-2012 (9 months)
adjusted*
3rd quarter 2013(3 months )
3rd quarter 2012 (3 months )
adjusted *
Revenue 3,374,868 3,321,981 945,455 1,023,064
Other operating revenues 173,710 129,042 66,249 44,597
Use of raw materials and consumables (1,799,678) (2,027,277) (468,856) (627,471)
Service costs (765,572) (664,149) (268,798) (236,646)
Personnel costs (358,946) (283,377) (91,193)
Amortisation, depreciation, provisions (302,633) (230,977) (103,969) (79,427)
Other operating costs (38,846) (29,038) (13,554) (9,701)
Capitalised costs 11,625 20,685 3,861 7,628
Operating profit 294,528 236,890 160,388 30,851
Portion of profits (loss) pertaining to associated companies 3,147 3,378 47 481
Financial income 73,050 66,895 8,532 21,295
Financial expense (188,364) (165,796) (49,886) (55,528)
Total financial income (expense), net (112,167) (95,523) (41,307) (33,752)
Other non-recurring non-operating income 74,806
Pre-tax profit 257,167 141,367 119,081 -2,901
Income taxes for the period (84,347) (64,524) (6,635) (561)
Net profit for the period 172,820 76,843 112,446 -3,462
Attributable to:
Shareholders of the Parent Company 161,650 67,341 (3,549) (6,441)
Non-controlling interests 11,170 9,502 3,494 2,979
Earnings per share
basic 0.122 0.061
diluted 0.116 0.059
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01.02 Consolidated comprehensive income statement
thousands of euros 30 September 2013 30 September 2012
9 months 9 months
Net profit / (loss) for the period 172,820 76,843
Items reclassifiable to the income statement
Change in the fair value of derivatives for the period 4,607 2,831
Tax effect related to the other reclassifiable items of the comprehensive income statement
(1,353) (726)
Change in the fair value of derivatives for the period for companies measured with the equity method
127 84
Items not reclassifiable to the income statement
Actuarial gains/(losses) post-employment benefits 1,672 (6,338)
Tax effect related to the other not reclassifiable items of the comprehensive income statement
(296) 1,498
Total comprehensive income/(loss) for the period 177,577 74,192
Attributable to:
Shareholders of the Parent Company 165,267 65,431
Non-controlling interests 12,310 8,761
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01.03 Earnings per share
thousands of euro 30 September 2013 30 September 2012
Profit (loss) for the period attributable to the shareholders of the parent company (A)
161,650 67,341
Interest expense related to the liability component of the convertible bonds
1,824 1,824
Adjusted profit (loss) for the period attributable to the shareholders of the parent company (B)
163,474 69,165
Weighted average number of shares outstanding for the purposes of calculating earnings (loss) per share:
- basic (C) 1,330,423,983 1,104,914,769
- diluted (D) 1,413,821,850 1,181,250,647
Earnings (losses) per share (in euro)
- basic (A/C) 0.122 0.061
- diluted (B/D) 0.116 0.059
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01.04 Consolidated statement of financial position
thousands of euros 30 September 201331 December 2012
as adjusted
ASSETS
Non-current assets
Property,plant and equipment 2,124,860 1,947,597
Intangible assets 2,508,646 1,855,966
Property investments 3,026 0
Goodwill 378,565 378,391
Non-controlling interests 147,818 139,730
Financial assets 46,425 17,557
Deferred tax assets 138,967 111,451
Financial instruments - derivatives 58,596 88,568
Total non-current assets 5,406,903 4,539,260
Current assets
Inventories 88,750 71,822
Trade receivables 1,409,420 1,307,961
Contract work in progress 23,551 20,635
Financial assets 62,527 47,286
Financial instruments - derivatives 14,738 34,199
Current tax assets 68,263 30,882
Other current assets 330,381 209,108
Cash and cash equivalents 484,917 424,162
Total current assets 2,482,547 2,146,055
Non-current assets held for sale 5,866 14,154
TOTAL ASSETS 7,895,316 6,699,469
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
thousands of euros 30 September 201331 December 2012
as adjusted
SHAREHOLDERS' EQUITY AND LIABILITIES
Share capital and reserves
Share capital 1,342,876 1,115,014
- Reserve treasury shares nominal value (12,452) (13,813)
- Expenses related to capital increase (135) 0
Reserves 574,079 523,481
- Reserve treasury shares -amount exceeding nominal value (3,426) (4,181)
- Reserves for derivative instruments recognised at fair value (3,767) (5,993)
Retained earnings (accumulated deficit) 2,061 2,061
Profit / (loss) for the period 161,650 119,417
Group equity 2,060,886 1,735,986
Non-controlling interests 140,949 141,355
Total equity 2,201,835 1,877,341
Non-current liabilities
Borrowings – maturing beyond 12 months 2,648,086 2,440,994
Post-employment benefits 132,848 112,963
Provisions for risks and charges 274,721 251,897
Deferrred tax liabilities 75,593 74,038
Finance lease payments - maturing beyond 12 months 12,851 13,356
Financial instruments - derivatives 23,354 32,963
Total non-current liabilities 3,167,453 2,926,211
Current liabilities
Banks and other borrowings – maturing within 12 months 751,637 317,560
Finance lease payments - maturing within 12 months 2,599 3,767
Trade payables 1,119,834 1,165,838
Current tax liabilities 92,735 20,463
Other current liabilities 539,987 350,060
Financial instruments - derivatives 19,236 38,229
Total current liabilities 2,526,028 1,895,917
Non-current assets held for sale 0
TOTAL LIABILITIES 5,693,481 4,822,128
TOTAL EQUITY AND LIABILITIES 7,895,316 6,699,469
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01.05 Consolidated cash flow statement
30 September 2013 30 September
as ajusted
Pre-tax profit 257,166 141,367
Adjustments to reconcile net profit to the cashflow from operating activities:
Amortisation and impairment of property, plant and equipment 121,087 100,066
Amortisation and impairment of intangible assets 107,952 75,100
Effect of valuation using the equity method (3,147) (3,378)
Allocations to provisions 73,829 56,133
Financial expense / (Income) 115,314 98,901
Bargain purchases (74,806) 0
(Capital gains) / Losses and other non-monetary elements(including valuation of commodity derivatives)
(3,882) (23,420)
Change in provisions for risks and charges (37,129) (16,947)
Change in provisions for employee benefits (3,806) (4,855)
Total cash flow before changes in net working capital 552,578 422,967
(Increase) / Decrease in inventories (9,464) (13,539)
(Increase) / Decrease in trade receivables 102,065 88,655
Increase / (Decrease) in trade payables (230,621) (211,012)
(Increase) / Decrease in other current assets/ liabilities (1,993) 45,537
Change in working capitals (140,013) (90,359)
Dividends collected 1,918 3,923
Interests income and other financial income collected 16,006 14,665
Interests expense and other financial charges paid (91,248) (98,007)
Taxes paid (52,517) (61,684)
Cash flow from (for) operating activities (a) 286,724 191,505
Investments in property, plant and development (75,983) (86,439)
Investments in intangible fixed assets (119,086) (99,268)
Investments in companies and business units net of cash and cash i l t
13,278 (1,854)
Sale price of property,plant and equipment and intangible assets(including lease-back transations)
2,128 6,293
Divestments of investments (280) (1,916)
(Increase) / Decrease in other investment activities (6,223) (4,061)
Cash flow from (for) investing activities (b) (186,166) (187,245)
New issues of long-term bonds 46,683 250,310
Repayments and other net changes in borrowings 48,348 (60,639)
Lease finance payments (3,368) (2,551)
Investments in consolidated companies (5,000) 0
Dividends paid out to Hera shareholders and non-controlling interests (129,104) (116,785)
Change in treasury shares 2,853 360
Other minor changes (215) 0
Cash flow from (for) financing activities (c) (39,803) 70,695
Effect of change in exchange rates on cash and cash equivalents (d) 0 0
Increase / (Decrease) in cash and cash equivalents (a+b+c+d) 60,755 74,955
Cash and cash equivalents at the beginning of the year 424,162 415,189
Cash and cash equivalents at the end of the year 484,917 490,144
thousands of euros
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.01.06 Statement of changes in consolidated equity
thousands of eurosShare capital
Reserves
Reserves for derivative
instruments recognised at fair
value
Profit for the year
Equity Non-controlling
interestsTotal
Balance at 31 December 2011 1,105,340 535,591 -8,606 104,590 1,736,915 142,431 1,879,346
Retrospective application IAS 19 revised -3,165 403 -560
Balance at 31 December 2011 (as ajusted ) 1,105,340 532,426 -8,606 104,993 1,734,153 141,871 1,876,024
Profit for the year 67,341 67,341 9,502 76,843
Other components of comprehensive income at 30 September 2012:
Fair value of derivatives, change in the year 2,359 2,359 -254 2,105
Change in the fair value of derivatives for the year for companies measured w ith the equity method
84 84 84
Actuarial gains/(losses) post-employment benefits -4,353 -4,353 -487 -4,840
Total comprehensive income for the year -4,269 2,359 67,341 65,431 8,761 74,192
Change in treasury shares -425 785 360 360
Change in scope of consolidation 80 80 703 783
Other movements -3 -3 -3
Allocation of 2011 profit:
- dividends paid out -16,925 -82,397 -99,322 -14,642 -113,964
- allocation to other reserves 5,823 -5,823 0 0
- undistributed profits to retained earnings 16,773 -16,773 0 0
Balance at 30 September 2012 1,104,915 534,690 -6,247 67,341 1,700,699 136,693 1,837,392
Balance at 31 December 2012 (as ajusted ) 1,101,201 521,361 -5,993 119,417 1,735,986 141,355 1,877,341
Profit for the year 161,650 161,650 11,170 172,820
Other components of comprehensive income at 30 June 2013:
Fair value of derivatives, change in the year 2,226 2,226 1,028 3,254
Change in the fair value of derivatives for the year for companies measured w ith the equity method
127 127 127
Actuarial gains/(losses) post-employment benefits 1,264 1,264 112 1,376
Total comprehensive income for the year 1,391 2,226 161,650 165,267 12,310 177,577
Change in treasury shares 1,361 755 2,116 2,116
Acquisition AcegasAps Group 227,727 51,725 279,452 -15 279,437
Change in equity investments -2,153 -2,153 -2,847 -5,000
Change in scope of consolidation 0 863 863
Other movements 30 30 -33 -3
Allocation of 2012 profit:
- dividends paid out -10,430 -109,382 -119,812 -10,684 -130,496
- allocation to other reserves 7,548 -7,548 0 0
- undistributed profits to retained earnings 2,487 -2,487 0 0
Balance at 30 September 2013 1,330,289 572,714 -3,767 161,650 2,060,886 140,949 2,201,835
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
52
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.02 Explanatory notes
Accounting policies and significant accounting estimates
The consolidated quarterly report for the three months to 30 September 2013 was prepared in accordance
with Article 154-ter of Legislative Decree 58/1998 and Article 82 of Consob’s Regulation on Issuers. This
report has not been audited.
This interim report was not prepared in accordance with IAS 34 - Interim Financial Reporting. However, the accounting standards adopted for this report are the same as those used to prepare the consolidated financial statements for the year ended 31 December 2012, to which reference is made for further information.
The preparation of this interim report requires estimates and assumptions to be made concerning the value
of revenues, costs, assets and liabilities and disclosures relating to contingent assets and liabilities at the
reporting date. If, in future, such estimates and assumptions, which are based on the management's best
judgment, should differ from actual events, they will be adjusted accordingly in order to give a true
representation of the results of operations.
It should also be noted that some measurement methods, particularly the more complex methods, such as
detecting any impairment of non-current assets, are generally applied only during the preparation of the
annual financial statements, unless there are indications of impairment which require an immediate
impairment test.
Income taxes are recognised based on the best estimate of the weighted average rate for the entire financial
year.
The disclosures contained in this interim report are comparable with those for prior periods.
When comparing the individual items in the income statement and the statement of financial position, account should be taken of the change in the scope of consolidation and the reclassification summaries described in those sections.
Notes related to the business combination with the AcegasAps Group
On 25 July 2012 Hera S.p.A. and AcegasAps Holding S.r.l., the company that owned 62.691% of AcegasAps
S.p.A., a listed multi-utility operating in Italy’s North-east entered into a master agreement to achieve a
business combination between the two Groups.
Pursuant to this agreement, effective 1 January 2013 AcegasAps Holding S.p.A. merged with and into Hera
S.p.A., which resulted in Hera S.p.A.’s acquisition of 62.691% of AcegasAps S.p.A.. On 2 January 2013
Hera S.p.A. launched a mandatory offer to buy and exchange for all the ordinary shares of AcegasAps that it
did not own, with the objective to delist the company.
On 3 May 2013, the offer’s closing date, Hera S.p.A. became the sole shareholder of AcegasAps S.p.A.,
raising its stake in this company from 62.691% to 99.784%, the rest being treasury shares.
This business combination is accounted for in accordance with IFRS 3, effective 1 January 2013, the date on
which the Hera Group acquired control over the AcegasAps Group. In particular, the AcegasAps Group’s
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
53
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
assets and liabilities will be recognized at their fair value and the acquiree’s accounting policies will be
aligned with those of the Hera Group.
It is worthy of note that, as of the end of the quarter under review, the allocation of the acquisition price was
still under way, even though the process has generated, to date, an extraordinary gain recognized as “Other
operating income” for €74.8 million.
Financial statements
The financial statements used are the same as those used for the consolidated financial statements at 31 December 2012. Specifically, the income statement is presented in vertical format, with the individual items analysed by nature. This presentation, also used by the company's major competitors, is considered consistent with international practice and is the one that best represents the company's performance.
The statement of financial position shows the distinction between current and non-current assets and
liabilities.
The comprehensive income statement reports separately income and expenses arising from transactions with “non-shareholders”. All changes in question (in our case, the value of the effective portion of gains and losses on cash flow hedge instruments) are reported separately. These changes are also reported separately in the statement of changes in consolidated equity.
The cash flows statement has been prepared using the indirect method, in accordance with IAS 7.
Unless otherwise stated, the financial statements contained in this interim report are all expressed in
thousands of Euros.
Scope of consolidation
This interim report includes the financial statements of the Parent Company, Hera Spa, and its subsidiaries. It also includes the financial statements of the companies in which the Group has joint control with other shareholders. Control is obtained when the Parent Company has the power to determine the financial and operating policies of a company in such a way as to benefit from its activities.
Subsidiary companies which are not significant in size and those in which voting rights are subject to severe
long-term restrictions are excluded from the scope of line-by-line consolidation and are carried at cost.
Equity interests representing long-term investments in associates which are significant in size are accounted
for with the equity method.
Companies held for sale are excluded from consolidation and measured at the lower of cost and fair value. These investments are recorded as separate items.
Joint ventures in which the Hera Group exercises joint control with other companies are consolidated
proportionately, with line-by-line recognition of assets, liabilities, revenues and costs in proportion to the
Group's share.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
54
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Changes in the scope of consolidation in the first three months of 2013, compared with the situation at 31
December 2012 are shown below:
Subsidiaries
Consolidated companies Deconsolidated companies Notes
Acegas-Aps SpA Consolidated on a line-by-
line basis
AcegasAps Service Srl Consolidated on a line-by-
line basis
CST Srl Consolidated on a line-by-
line basis
Famula on line in liquidazione SpA Wound up
Energonut SpA Merged into Herambiente
Hera Servizi Cimiteriali Srl Sold
Hera Servizi Funerari Srl Sold
Iniziative Ambientali Srl Consolidated on a line-by-
line basis
Insigna Srl Consolidated on a line-by-
line basis
Modena Network SpA Consolidated on a line-by-
line basis
NestAmbiente Srl Consolidated on a line-by-
line basis
Rila Gas AD Consolidated on a line-by-
line basis
SiGas d.o.o Consolidated on a line-by-
line basis
Sinergie SpA Consolidated on a line-by-
line basis
Società Italiana Lining Srl Consolidated on a line-by-
line basis
Trieste Onoranze e Trasp. Funebri
Srl
Consolidated on a line-by-
line basis
Tri-Generazione Srl Consolidated on a line-by-
line basis
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
55
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Associated companies
New companies accounted
for with the equity method
Companies no more
accounted for with the
equity method
Notes
Elettrogorizia SpA Accounted for with the equity method
Modena Network Consolidated on a line-by-line basis
Refri Srl Sold
Joint ventures
Consolidated
companies Deconsolidated companies Notes
Aristea Scarl Consolidated proportionately
Estenergy Spa Consolidated proportionately
Est Reti Elettriche Spa Consolidated proportionately
Estpiù Spa Consolidated proportionately
Isontina Reti Gas Spa Consolidated proportionately
The main changes in the scope of consolidation were due entirely to the business combination with the
AcegasAps Group.
Effective 1 January 2013, Hera Spa acquired the assets of Famula On-Line Spa, a company engaged in
organization, planning, production sales and consulting in the areas of information technology, computer
services and data processing. On the same date, liquidation proceedings began for Famula On-Line S.p.A.
On 13 June 2013 the shareholders approved the liquidation accounts and the relevant distribution plan. As
such, this company is no longer consolidated. On 25 June 2013, the company was cancelled from the
Companies Register.
On 19 April 2013 Acantho S.p.A. purchased an additional 10% of Modena Network S.p.A. from Sorgea S.r.l., thereby increasing its equity stake to 40%. The company, which was previously recognized with the equity method, is now consolidated on a line-by-line basis, given that the Group exercises control over it, thanks to a 14% investment by Hera S.p.A. and a 28% equity interest held by Aimag S.p.A.
On 19 June 2013 Herambiente S.p.A. sold its investment in Refri S.r.L. to Unieco Costruzioni Meccaniche Srl.
On 1 July 2013 wholly-owned subsidiary Energonut S.p.A. was merged with and into Herambiente S.p.A..
On 1 August 2013 the parent company, Hera S.p.A., sold to the Municipality of Bologna Hera Servizi
Cimiteriali S.r.l.. Following this disposal, Hera Servizi Cimiteriali S.r.l. is no longer consolidated.
The list of companies included in the scope of consolidation is shown at the end of these notes.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Changes in equity investments
On 19 June 2013 Herambiente S.p.A. purchased from Unieco Costruzioni Meccaniche S.r.l. the entire non-
controlling interest (49% of share capital ) in Nuova Geovis S.p.A., thereby becoming sole shareholder, for
€4,500 thousand. In addition, on 5 August 2013, Herambiente S.p.A. acquired the equity interests of the
Municipalities of Galliera and Barighella (for a total equity interest of 40%) in Gal.A. S.p.A., thereby becoming
the company’s sole shareholder, for €500 thousand. In both cases the difference between the adjustment of
the non-controlling interests and the fair value of the price paid was recognized directly in equity and
attributed to the shareholders of the parent company.
On 30 September 2013 AcegasAps S.p.A. purchased from ENI S.p.A. 20% of Isontina Reti Gas S.p.A., a
company controlled jointly by both. Following this transaction, Isontina Reti Gas S.p.A. is now equally held by
AcegasAps S.p.A. and ENI S.p.A.. In the absence of changes in the governance structure, control remains
joint.
Reclassification summary
As of 1 January 2013, the Hera Group applied IAS 19 revised, which calls for the termination of the “corridor
method” to account for actuarial gains and losses. Therefore, it was necessary to reclassify the statement of
financial position at 31 December 2012, as this standard requires the retrospective application of such
changes.
In addition, the income statement for the first nine months of 2012 was restated to take into account the
aborted sale, for reasons beyond the company’s control, of the Berti Pichat area
Below, the restated income statement for the nine months ended 30 September 2012 and the statement of
financial position as of 31 December 2012 are shown:
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Restated income statement for the nine months ended 30 September 2012
thousands of euros30 September
2012reported
Adjustment ias19R
Adjustment including area
berti
30 September 2012adjusted*
3rd quarter2012 (3 months )
reported
3rd quarter2012 (3 months )
adjusted *
Revenue 3,321,981 3,321,981 1,023,064 1,023,064
Other operating revenues 135,667 (6,625) 129,042 44,597 44,597
of which non-recurrent 6,625 (6,625) 0 0 0
Use of raw materials and consumables (2,027,277) (2,027,277) (627,471) (627,471)
Service costs (664,149) (664,149) (236,646) (236,646)
Personnel costs (284,297) 920 (283,377) (91,500) (91,193)
Amortisation, depreciation, provisions (230,977) (230,977) (79,427) (79,427)
Other operating costs (29,038) (29,038) (9,701) (9,701)
Capitalised costs 20,685 20,685 7,628 7,628
Operating profit 242,595 920 (6,625) 236,890 30,544 30,851
Portion of profits (loss) pertaining to associated companies 3,378 3,378 481 481
Financial income 66,895 66,895 21,295 21,295
Financial expense (165,796) (165,796) (55,528) (55,528)
Total financial operations (95,523) (95,523) (33,752) (33,752)
Pre-tax profit 147,072 920 (6,625) 141,367 (3,208) (2,901)
Taxes for the period (67,430) (437) 3,343 (64,524) (597) (561)
Net profit for the period 79,642 483 (3,282) 76,843 (3,805) (3,462)
Attributable to:
Shareholders of the Parent Company 70,169 454 (3,282) 67,341 (6,774) (6,441)
Non-controlling interests 9,473 29 0 9,502 2,969 2,979
Earnings per share
basic 0.064 0.061
diluted 0.061 0.059
* The comparative data have been adjusted to reflect the changes indicated in the "Reclassification summary" in the notes.
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Restated statement of financial position at 31 December 2012
Other information
These interim financial statements as of and for the nine months ended 30 September 2013 have been
prepared by the Board of Directors and approved by it on 13 November 2013.
thousands of euros 31/12/2012 reported ias 19R31December 2012
as adjusted *
SHAREHOLDERS' EQUITY AND LIABILITIES
Share capital and reserves
Share capital 1,115,014 1,115,014
- Reserve treasury shares - nominal value (13,813) (13,813)
- Expenses related to capital increase 0.00 0
Reserves 540,138 -16,657 523,481
- Reserve treasury shares -amount exceeding nominal value (4,181) (4,181)
- Reserves for derivative instruments recognised at fair value (5,993) (5,993)
Retained earnings (accumulated deficit) 2,061 2,061
Profit / (loss) for the period 118,658 759 119,417
Group equity 1,751,884 -15,898 1,735,986
Non-controlling interests 142,978 (1,623) 141,355
Total equity 1,894,862 (17,521) 1,877,341
Non-current liabilities
Borrowings – maturing beyond 12 months 2,440,994 2,440,994
Post-employment benefits 91,366 21,597 112,963
Provisions for risks and charges 251,897 251,897
Deferrred tax liabilities 78,114 (4,076) 74,038
Finance lease payments - maturing beyond 12 months 13,356 13,356
Financial instruments - derivatives 32,963 32,963
Total non-current liabilities 2,908,690 17,521 2,926,211
Current liabilities
Banks and other borrowings – maturing within 12 months 317,560 317,560
Finance lease payments - maturing within 12 months 3,767 3,767
Trade payables 1,165,838 1,165,838
Current tax liabilities 20,463 20,463
Other current liabilities 350,060 350,060
Financial instruments - derivatives 38,229 38,229
Total current liabilities 1,895,917 1,895,917
Non-current assets held for sale 0 0
TOTAL LIABILITIES 4,804,607 17,521 4,822,128
TOTAL EQUITY AND LIABILITIES 6,699,469 0 6,699,469
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
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Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.03 Consolidated net borrowings
millions of euros30 September
201331 December
2012
a Cash 484.9 424.2
b Other current financial receivables 62.5 47.3
Current bank debt (378.7) (74.7)
Current portion of bank debt (291.5) (225.7)
Other current financial liabilities (81.4) (17.1)
Finance lease payables due within 12 months (2.6) (3.8) c Current financial debt (754.2) (321.3)
d=a+b+c Net current financial debt (206.8) 150.2
e Non-current financial receivables 46.4 17.6
Non-current bank debt and bonds issued (2,593.3) (2,371.0)
Other non-current financial liabilities (9.9) 0
Finance lease payables due after 12 months (12.8) (13.4)
f Non-current financial debt (2,616.0) (2,384.4)
g=e+f Net non-current financial debt (2,569.6) (2,366.8)
h=d+g Net financial debt (2,776.4) (2,216.6)
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
60
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
2.04 Equity investments
Subsidiaries
Name Registered office Share capitalTotal equity
investment
direct indi rect
Parent company: Hera Spa Bologna 1,342,876,078
Acantho Spa Imola (BO) 22,500,000 79.94% 79.94%
Acegas ‐Aps Spa Trieste 283,690,763 100.00% 100.00%
AcegasAps Service Srl Padova 1,480,400 100.00% 100.00%
Akron Spa Imola (BO) 1,152,940 43.13% 43.13%
ASA Scpa Castelmaggiore (BO) 1,820,000 38.25% 38.25%
Consorzio Akhea Fondo Consorti le Bologna 200,000 59.38% 59.38%
CST Srl Pordenone 104,000 100.00% 100.00%
Eris Scrl Ravenna 300,000 51.00% 51.00%
Feronia Srl Finale Emi l ia (MO) 2,430,000 52.50% 52.50%
Frul lo Energia Ambiente Srl Bologna 17,139,100 38.25% 38.25%
Gal .A. Spa Bologna 300,000 75.00% 75.00%
HeraAmbiente Spa Bologna 271,148,000 75.00% 75.00%
Hera Comm Srl Imola (BO) 53,136,987 100.00% 100.00%
Hera Comm Marche Srl Urbino (PU) 1,977,332 70.54% 70.54%
Hera Energie Srl Bologna 926,000 51.00% 51.00%
Hera Energie Rinnovabi l i Spa Bologna 1,832,000 100.00% 100.00%
Hera Luce Srl San Mauro Pascol i (FC) 1,000,000 89.58% 89.58%
Herasocrem Srl Bologna 100,000 51.00% 51.00%
Hera Trading Srl Trieste 22,600,000 100.00% 100.00%
Iniziative Ambienta l i Srl Padova 110,000 100.00% 100.00%
Ins igna Srl Padova 10,000 100.00% 100.00%
Marche Multiservizi Spa Pesaro 13,484,242 44.62% 44.62%
Medea Spa Sassari 4,500,000 100.00% 100.00%
MMS Ecologica Srl Pesaro 95,000 44.62% 44.62%
Modena Network Spa Modena 3,000,000 14.00% 31.97% 45.97%
Naturambiente Srl Pesaro 50,000 44.62% 44.62%
NestAmbiente Srl Padova 1,748,472 100.00% 100.00%
Nuova Geovis Spa Sant'Agata Bolognese (BO) 2,205,000 75.00% 75.00%
Ri la Gas AD Sofia (Bulgaria) 33.337lev/000 100.00% 100.00%
Romagna Compost Srl Cesena 3,560,002 45.00% 45.00%
SiGas d.o.o Pozega (Serbia) 162.260.057,70 din 95.78% 95.78%
Sinergia Srl Forl ì 579,600 59.00% 59.00%
Sinergie Spa Padova 11,168,284 100.00% 100.00%
Società Ita l iana Lining Srl Padova 90,000 100.00% 100.00%
Sotri s Spa Ravenna 2,340,000 5.00% 52.50% 57.50%
Svi luppo Ambiente Toscana Srl Bologna 10,000 95.00% 3.75% 98.75%
Trieste Onoranze e Trasporti Funebri Srl Trieste 50,000 100.00% 100.00%
Tri ‐Generazione Srl* Padova 100,000 70.00% 70.00%
Uniflotte Srl Bologna 2,254,177 97.00% 97.00%
* Trigenerazione Srl 's paid‐in share capita l amounts to €25,000
% held
Hera Group ‐ Consolidated quarterly report as at 30 September 2013
61
Approved by Hera S.p.A.’s Board of Directors on 13 November 2013
Joint ventures
Name Registered office Share capitalTotal equity
investment
direct indirect
Ari stea Sinergie I l luminazione Scarl* Padova 10,000 50.00% 50.00%
Enomondo Srl Faenza (RA) 14,000,000 37.50% 37.50%
Estenergy Spa Trieste 1,718,096 51.00% 51.00%
Est Reti Elettriche Spa Gorizia 17,450,000 30.00% 30.00%
Estpiù Spa Gorizia 7,100,000 30.00% 30.00%
Isontina Reti Gas Spa Gradisca D'Isonzo (GO) 17,450,000 50.00% 50.00%
* Aris tea Sinergie I l luminazione Scarl 's paid‐in share capita l amounts to €2,500
Associated companies
Name Registered office Share capitalTotal equity
investment
direct indirect
Aimag Spa* Mirandola (MO) 78,027,681 25.00% 25.00%
Elettrogorizia Spa Trieste 5,600,000 33.00% 33.00%
FlameEnergy Trading Gmbh Vienna 3,000,000 50.00% 50.00%
Ghirlandina Solare Srl Concordia Sul la Secchia (MO) 60,000 33.00% 33.00%
Q.Thermo Srl Fi renze 10,000 39.50% 39.50%
Set Spa Mi lano 120,000 39.00% 39.00%
So.Sel Spa Modena 240,240 26.00% 26.00%
Sgr Servizi Spa Rimini 5,982,262 29.61% 29.61%
Tamarete Energia Srl Ortona (CH) 3,600,000 32.00% 32.00%
* Aimag's share capi ta l cons is ts of ordinary shares for €67,577,681 and tracking shares for €10,450,000
% held
% held